• December 19, 2014

Paying Taxes and Giving to Charity Aren’t the Same Thing

Some of the wealthiest Americans have started to contend that paying taxes and making charitable gifts are just about the same thing. Their failure to grasp the profound difference between the two presents a very real problem for nonprofit organizations and our democracy.

Mitt Romney epitomized this thinking last January when he tacked charitable contributions onto his taxes while discussing the percentage of income reported and paid on his 2010 return. He used the same calculus again a few weeks ago while defending his record and his refusal to release past tax returns.

It quickly spread: Last month another multimillionaire took out a full-page ad in the national edition of The New York Times to oppose President Obama’s tax proposals and said that “I realize paying taxes is a form of charitable giving in a sense.” Affirming such conservative and libertarian thinking, a Cato Institute official also declared that “taxes are a form of charity.”

Millionaires and other wealthy people argue that they would give more to charity if they paid lower taxes, as they surely would under proposals put forth by Mitt Romney and in the House-approved budget drafted by his running mate Paul Ryan.

That assertion is directly contradicted by scholarly studies. We know that when taxes go down, people give less generously. Lower taxes mean that what scholars call “the price of giving” goes up; the value of the tax deduction per donated dollar is less.

The notion that the wealthy will pay out in voluntary contributions what they don’t pay in mandatory taxes may seem an attractive proposition to some charities, but it just isn’t so.

While there may be more discretionary money in the pockets of millionaires, it tends to stay there. As a matter of fact, the wealthy give a smaller percentage of their income to charity than do moderate- and low-income people.

They also give to different charities than those with less income. The social psychologist Paul Piff, who studies the effects of income on personal behavior, told The Chronicle last month that “the more wealth you have, the more focused on your own self and your own needs you become and the less attuned to the needs of other people.” He has shown that wealth can make people “more selfish, more insular, and less compassionate than other people.”

Much of this has been known since 1990 when Terry Odendahl published Charity Begins at Home; wealthy Americans tend to support the nonprofit institutions that they themselves use. That includes elite universities, museums, operas, and performing-arts groups as well as other cultural institutions and some hospitals and medical facilities.

While such philanthropic activity is to be commended, few would consider these institutions to be on the frontline of charities dealing with today’s most pressing problems.

And those problems are growing worse due to inadequate government funds. Parks, roads, and the power grid are deteriorating, while efforts to improve schools, assure food safety, slow the shrinking of the middle class, alleviate poverty, protect the environment, care for animals, and deal with myriad other issues are all hampered by the money squeeze facing governments at every level.

While charitable support can and should be directed to solve these critical social, environmental, and economic challenges, it cannot and ought not be seen as a replacement for government. We established government to hold enduring responsibility for America’s public safety and welfare.

It is government that has the ability, through our democratically elected representatives, to identify and analyze threats to Americans’ safety and welfare, to set priorities, and to propose and adopt appropriate responses. It is only government—at the federal, state, and local levels—that has the legitimate power appropriate to these tasks. And government must have the authority to secure the money needed to carry out its jobs.

Neither civil society nor the market can fulfill the role of government. Donors can decide to support anything they want, and they should—but they are not obligated to look out for the common good in the way we demand of elected representatives.

By claiming that they should be able to make voluntary charitable contributions rather than pay taxes is for the wealthy to demand the right to decide what is best for the rest of us. It is the wealthy placing themselves outside and above the public will. It is an elite demand for undue and illegitimate influence in the democratic process.

This does not serve the nation or charities well. The tax money being diverted to millionaires’ pockets will quite likely not make it to charities’ bank accounts, especially not to those of organizations that try to serve the needy.

In fact, the greed of millionaires who insist on lower taxes leads directly to the decline and actual decimation of government coffers to address myriad problems. That means that nonprofits will face growing needs of people and communities whose problems are made worse by declining government efforts at the same time that fewer government dollars are available to support charities’ programs.

The leaders of charities, as well as everyone else who cares about the common good, need to challenge the notion that private avarice—no matter what the false promise of additional philanthropy—is no substitute for public responsibility.

Mark Rosenman, a scholar and activist, directs Caring to Change, a project to improve how foundations serve the public. He is also an emeritus professor at Union Institute and University.

  • 1255 Twenty-Third St., N.W.
  • Washington, D.C. 20037
subscribe today

Raise more money and increase awareness with trusted insight.