"Real" Charity & the Tax Code

There's a church across from the pizza place in town that has a marquee showcasing a clever saying each week.  I see it everyday on my way to the post office.

This week it reads "Real charity doesn't care if it's tax deductible or not."  I've read it at least a dozen times and I think I've finally figured out why it has been bothering me so. 

It's not because I whole-heartedly disagree with the sentiment.  I do believe that people give for a variety of reasons and most of them have little to do with a mathematical calculation from their 1040 form.  That said, I disagree with the statement and I think it perpetuates our societal hang-ups about giving and charity. 

Yesterday I listened to a fascinating TED talk by Dan Pallotta entitled "The Way We Think About Charity is Dead Wrong."  It's 15 minutes I'd recommend viewing.  Pallotta contends that American views of charity trace back to our Puritanical roots, where giving ultimately was a form of "penance" for success.  Framed in this light, giving is a moral obligation forced from economic achievement, but wholly separate from and not driven by basic market principles.

That's what the marquee this week is offering – that only "good" or "real" charity is done purely selflessly, without economic benefit.  But, we live in a capitalist society where much of what we value comes to be understood in an economic context.  What's so wrong with giving that is done with feeling and emotion AND careful analysis and economic benefit?  Must giving that produces a social benefit preclude any individual economic benefit?

I'm a believer in a society where giving is so valued, so recognized as a part of the human experience, and so respected for its positive social impacts, that our primary economic systems incentivize it.  To me that doesn't de-value the philanthropy but rather multiplies its importance.

For the last six months, the news has highlighted again and again the threats to the current income tax deduction for charitable contributions.  Amidst complex mathematical models that predict the impacts on giving under different tax scenarios and the moral arguments about who benefits, I keep coming back to the same argument in defense of the charitable tax deduction. 

Like it or not, our tax code has become a societal scale weighing what we value.  Remove the tax deduction now and I believe giving will take a huge hit.  Not just from wealthy donors who will find their itemized tax bill altered by the change, but from everyday donors who don't actually benefit from the tax deduction now.  Simply changing the rules will devalue giving. It will send the signal that it's not so important anymore.  It shifts the context and something that our government (society) once cared about suddenly won't carry that authority.   If, in the end, eliminating or restricting the charitable tax deduction causes the philanthropic pie to shrink, do we really think charity has become more "real?"  I don't.

What do you think about the charitable tax-deduction?  I'd love to hear your thoughts on this complex topic or on Pallotta's intriguing platform.