Monday, June 28, 2010

The Common Denominator between Voluntary Taxes and Charitable Giving

An interesting story in the Boston Globe discusses the potential viability of raising governmental revenues through voluntary taxes.   The article, which quotes Yale law professor Ian Ayres and U.S.C. law professor Edward McCaffery, begins with the following fascinating statistics:


In tax year 2008, the Massachusetts Natural Heritage and Endangered Species Fund received $216,544 in taxpayer money to protect threatened species, such as the bald eagle and the marbled salamander. The state's Organ Transplant Fund received $117,654 to help patients who need new kidneys and hearts pay for medical care. And the Massachusetts AIDS Fund got $112,939 for research and education relating to the disease.  The functions of these programs differ widely, but they all share one remarkable feature.  The taxpayer dollars were not wrenched from the pockets of the Commonwealth's residents.

The gist of the article is that those who object to higher taxes would not necessarily decline to pay more taxes when asked to do so.  According to the story, research conducted by economists at the University of Texas at Dallas suggests that many people would in fact voluntarily raise their tax bills if they are given the opportunity to do something that donors to charity have long done – direct the use of their transfers to some degree.  When tax revenues are sought to support specific governmental projects, research reportedly shows that people are almost as likely to pay additional taxes to support such projects as they are to donate sums to charity.  The research suggests that people do not necessarily object to paying more to government.  Rather, they want some assurance that taxes will be spent for purposes that the taxpayers value.  The obvious potential benefit of facilitating voluntary tax payments is enhanced funding of worthy public projects.  The article also notes the possible negative effects of relying on voluntary taxes, such as enhancing the political influence of the wealthy and shifting responsibility for making allocations of public resources from governmental decision makers to private hands. 

These concerns are, of course, familiar to scholars of tax law and charity law, because analogous points figure prominently in debates surrounding the charitable contributions deduction and tax expenditures.

JRB

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