Making It Easier to Work Together
November 8, 2019
“Government,” Democrats often say, “is simply the name we give to the things we choose to do together."
And while it is true there are many things we do together through government - national defense, interstate highways, and law enforcement to name a few – there are far more things we do together that do not require government programs: producing food, making cars, building homes, and most importantly – raising a family. These activities are all best accomplished by voluntary interactions between citizens.
As Alexis de Tocqueville wrote, “I often saw Americans make great and genuine sacrifices for the public, and I remarked a hundred times that, when needed, the almost never fail to lend faithful support to one another.”
Our federal government has long recognized the importance of voluntary coordination which is why the charitable deduction has been a part of the tax code for decades. But the nature of how Americans practice charity is changing and there are some policy changes we should consider to make it easier for all Americans to give to causes they believe in.
First the good news, charitable giving has risen from 1.6 percent of gross domestic product in 1978 to 2.1 percent in 2018. Unfortunately, while total giving has increased, the percent of Americans giving has decreased from 66 percent in 2000 to 56 percent in 2014. And the drop has been most pronounced among lower-income Americans. Today, just 38 percent of households making $50,000 or less gave o charity, compared to 87 percent of households making more than $150,000.
There are two big reasons we should be concerned that lower-income Americans are giving less while higher-income giving is making up a higher percentage of overall giving.
First, high-income and low-income Americans give to different charitable causes. High-income Americans are far more likely to give to elite educational institutions (like Harvard and Stanford) that provide no value to most Americans. Low-income Americans are far more likely to give to organizations that actually help the poor like the Salvation Army and the United Way.
Second, charitable giving itself helps bind people into a larger community. As the Joint Economic Committee recently wrote in its “The Wealth of Relations” report, “Individual investment in social capital often creates benefits for the entire community, such as norms of trust and reciprocity.” In other words, when people give to their church or local service organization, they are more emotionally invested in that organization, and are more likely to participate in the public goods that organization provides to the community.
There are some steps we should consider taking to make it easier for more Americans to participate in charitable giving. The Joint Economic Committee released a new report this week, “Reforming the Charitable Deduction,” that identifies two such options.
“One reform option,” the report explains, “is to make the charitable deduction more widely available. Perhaps the most common proposal for reform is moving the deduction “above the line,” making it available to both itemizers and non-itemizers. Other above-the-line deductions already exist, such as those for retirement account contributions and student loan interest payments; this reform would simply give the same treatment to the charitable deduction.”
“A second option for reform,” the report notes, “would be to transform the deduction into a credit worth some percent of the value of a taxpayer’s total giving. For example, with a 25 percent credit, someone’s tax liability would fall by 25 percent of the value of all donations, regardless of tax rates or the size of the donations.”
Each of these options comes at a cost in federal revenues, so there is still much to debate. But, if we are serious about rebuilding our civil society by making federal policy more friendly to voluntary cooperation, these are two policy proposals we should consider.