Tuesday, November 22, 2011

"By encouraging individuals to make their own choices on how to spend money for the public good, the deduction makes society as a whole better off. Let’s keep it that way."

Stephen Carter pushes back against the "rising mania among politicians" to "either eliminat[e] or severely restrict[] the charitable deduction."  It's interesting throughout.  Among other things, he argues that it's "silly" to "suppose that eliminating the deduction will have little effect on donations":

"Consistent research over the years has shown that charitable giving ... is price-elastic, at least in the higher tax brackets, where giving disproportionately takes place. ... The price of a gift rises when the value of the deduction falls. If a taxpayer in the 35 percent bracket makes a $1,000 contribution, the 'price' is only $650, because of the $350 deduction. Should his deduction be capped at, say, half its nominal amount, then the deduction is only $175, and the 'price' rises to $825. Should the deduction be eliminated, then the price of the $1,000 contribution is $1,000. It is difficult to imagine a universe in which this rising price would have no effect on consumption of a good."