Thursday, September 19, 2019

Tax History: Charity Deductions Are for the Rich — and That Was Always the Plan

The September 16th edition of Tax Notes included an interesting article entitled Tax History: Charity Deductions Are for the Rich -- and That Was Always the Plan.  The article reviews an article published by economist Nicolas Duquette in the Business History Review on the history of the charitable contribution deduction (see here).  The following are introductory paragraphs of the Tax Notes piece:

In 1917 Congress created an income tax deduction for charitable gifts. The provision was itself a gift — to the nation’s wealthiest philanthropists. And in the century since, it has remained a rich person’s benefit, subsidizing charitable giving by a relatively small slice of the taxpaying public.

That’s the takeaway of a new article on the history of the charitable deduction, published last month by the Business History Review. In “Founders’ Fortunes and Philanthropy: A History of the U.S. Charitable-Contribution Deduction,” economist Nicolas J. Duquette traces the deduction’s creation and evolution, emphasizing its focus on the nation’s economic elite. “The philanthropy of the very rich has always been the object of the tax deduction, and the modern conception of it as an incentive for giving more broadly is a new element of our discourse,” Duquette writes.

What’s less new, however, are other conceptions that helped spur the creation of the deduction and shaped its development over the past century. In particular, the deduction has drawn strength from a durable anti-government strain in American political culture that often prefers private to public forms of social welfare.

“We trust one another, and not just the government, to make important decisions and to take action,” observed Yale economist Robert J. Shiller in a 2012 New York Times article. “We don’t rely on government to set all of our goals — even our social goals, our wishes for the nation’s future. The essential question we all must answer is how we can achieve the good society.” . . .

[See also TaxProf Blog]

Nicholas Mirkay 

https://lawprofessors.typepad.com/nonprofit/2019/09/tax-history-charity-deductions-are-for-the-rich-and-that-was-always-the-plan.html

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