Should YOU have to pay money to subsidize MY donations to Focus on the Family?

[cthulu2016]

Everyone knows that tax deductions are government subsidies of favored behaviors, like owning a house. Renters pay more so that owners can pay less. An owner with 50K income pays less tax than a renter with 50K income.

In the case of a social policy like encouraging home ownership one can argue the merits.

A social policy to encourage giving money to churches is, however, an establishment clause problem any way you look at it. The government is not permitted to have an opinion on whether giving to churches is good or bad social policy.

But the people who give to churches are numerous and influential so we have two different effective tax rates for tithers and non-believers. To make the establishment clause problem less glaring, we also subsidize certain non-religious donations.

After all, if all tax-payers have to subsidize your financial support of anti-gay rights ballot initiatives and burning Korans it is only fair that they should also have to subsidize your donations to non-church operations like Focus on the Family, or the pro-smoking think tank the Heartland Institute.

Not all "charitable giving" is right wing hate, of course. I have used these examples to hone the point. But there is no reason for YOU to pay money to subsidize MY choice to donate to even "nice" charities.

Medicaid is a good "charity." All taxpayers have to pay something for Medicaid because our elected government has decided that medicaid is a good thing to help the poor. And we all have to honor that collective decision.

But we get to vote for or against the government giving money to medicaid. We have a say.

You never get to vote on whether I give money to Focus on the Family. It is an entirely personal decision on my part that, mysteriously, you get to subsidize.

And it is indeed a subsidy.

Taxpayer A (secular) has an income of 50K.
Taxpayer B (tithing churchgoer) has an income of 50K.

Tax rate of 20%.

A pays $10K tax.
B pays $9K tax.

So the government reckoned, in devising the tax system, that it needs to get $19K from the combination of A and B.

So why don't they both pay $9500? Taxpayer A quite literally pays a higher tax to offset B's tithing.

It is essentially a government "matching funds" program for giving money to churches. If the tax rate is 20% then the government is saying, "For every $10,000 you give to the church, we will match $2,000 of your donation." (You save $2K tax for every $10K you put up.)

[Jackpine Radical]

1. A very interesting analysis.

Including some points I never particularly thought about in any depth.

Thank you.

[jody]

2. OK I support eliminating all tax-exempt non-profit organizations. nt

[cthulu2016]

3. The tax status, not the organizations themselves.

[jody]

4. Mea culpa, I support eliminating the tax status for all identified by IRS at the link below.

http://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check

[SickOfTheOnePct]

5. IMO, your analysis fails here

Taxpayer A was going to pay $10K in taxes whether Taxpayer B contributed to charity and got the deduction or not. Taxpayer A's tax bill wouldn't have dropped if Taxpayer B didn't take the deduction.

I also disagree with your contention that offering tax deductions for charitable deductions to churches is a violation of the Establishment clause. If it were only offered for donations to certain religions (i.e., only to Christian churches, or only to Jewish temples), then I would agree, but that is not the case.

In addition, if the deduction was only available for churches or religious non-profits, then I would agree that it was favoring the religious over the non-religious in the tax code. However, that is not the case - there are literally thousands of non-religious non-profit organizations to which a non-believer can donate in order to obtain the same tax advantage.

Perhaps where you and I view it differently is that I view the money as mine until I pay it to the government via income tax, and as such, what I don't give to them due to charitable deductions is not a government subsidy to me, but rather me just keeping a little more than I would have otherwise. Perhaps I'm not understanding, and if so, please correct me, but it seems to me that your perspective is more along the lines of my original tax burden is the government's money, and if I use charitable deductions to reduce that burden, then the government is giving me money.

This is a very interesting subject though - thank you for putting out a very valid perspective.

[cthulu2016]

6. I would phrase it this way...

Taxpayer A was going to pay $10K in taxes whether Taxpayer B contributed to charity and got the deduction or not. Taxpayer A's tax bill wouldn't have dropped if Taxpayer B didn't take the deduction.

In terms of what happens in that tax year, literally, that's correct.

But we could say the same of turnstile jumpers. If I jump the turnstile it does not cost the guy behind me in line anything more... he still pays $1.00 or whatever the fare is.

But the fare he pays 1) is already higher to account for turnstile jumpers, and 2) will go up next year of turnstile jumping becomes more common.

____


With a giver and non-giver, A and B are both paying marginal tax rates that were calculated in light of a prediction of the level of revenue loss from the deduction. Both are paying a higher rate than if the deduction didn't exist, but A more than makes up for that higher rate. (In a universe of two taxpayers the higher rate would generate enough from both A and B to cover exactly 1/2 of A's savings, and B would pick up the other half.)

And even if any shortfall from charitable giving deductions is covered by deficit spending, the debt incurred is held by the government generally—it is owed by both A and B.

[dawg]

7. You're right about this, but Democrats would be foolish to advocate for change.

It would play right into the anti-religious stereotype the Republicans have been trying to hang on us since the 1960's - and that would work with a significant number of voters.

By the way, the same could be said for the mortgage deduction. I saved money for a large down-payment and bought a very affordable house. I only paid mortgage interest for ten years or so before my mortgage was totally paid off. Why should my taxes be higher in order to subsidize someone else who went deep into debt in order to live more luxuriously than me?

[cthulu2016]

8. I certainly agree it is bad politics!

The OP is just my analysis of what I consider to be a rather glaring establishment clause problem, but I wouldn't recommenced anyone running for office taking up the cause.

It is funny to me that everyone recognizes that deductions are subsidies when it comes to oil exploration, or home ownership, but that charitable giving is seldom described that way.