Sunday, September 15, 2019
Vox, The Charitable Deduction Is Mostly for the Rich. A New Study Argues That’s by Design.:
In the early 20th century, legislators carved out a tax break to help megaphilanthropists. It still shapes our tax law today. ... [A] a new paper published this week in Business History Review argues that throughout its 100-year history, the charitable deduction was always aimed primarily at benefiting the rich.
Nicolas J. Duquette (USC), Founders’ Fortunes and Philanthropy: A History of the U.S. Charitable-Contribution Deduction, 93 Bus. Hist. Rev. 553 (2019):
Since 1917, tax filers in the United States who itemize tax deductions have been able to subtract gifts to eligible charities from their taxable income. The deduction is especially valuable to successful entrepreneurs who donate corporate stock.
Such philanthropy was seen as a close substitute for government spending until after the mid-twentieth century. In the 1950s and 1960s, high tax rates catalyzed the formation of large foundations from industrial fortunes and precipitated a national debate about the legitimacy of such giving. The midcentury debate preceded increased oversight of charities and foundations and a shift in the way U.S. lawmakers regarded the contribution deduction—from a subsidy by philanthropists of public goods government would otherwise provide to an implicit public cost.
Nicolas J. Duquette (USC), Highlighting The (Elitist) History Of The Charitable Contribution Income Tax Deduction:
The US charitable-contribution income-tax deduction marked its centennial in 2017. Relative to nearly every other aspect of the federal income tax, the workings of the deduction have changed little since its creation in 1917. Both major US political parties have at times called to reform the deduction’s structure, which disproportionately grants high-income taxpayers eligibility and the highest subsidy rates. Yet as I explain in an upcoming paper in Business History Review, this structure is no accident—high-income households have always been the main targets of the charitable-contribution deduction. It is a policy that is essentially, and not accidentally, elitist.