Is Harvard A Charity?

In yesterday's edition of the Los Angeles Times Robert Reich, who was Secretary of Labor under President Clinton, proposed the following:  If a charitable donation goes to an institution or agency set up to help the poor, the donor should get the full tax deduction.  If the donation goes to any other nonprofit, the donor would only get to deduct half the contribution.

The broader idea is that gifts to institutions that do not provide a "public benefit" or that cater to the wealthy elite  should not merit an underwriting from the  public at large in the form of foregone taxes on that money.  A gift to the Salvation Army deserves a deduction; a gift to Harvard does not.

I have great respect for Mr. Reich.  His recently published book, "Supercapitalism: The Transformation of Business, Democracy, and Everyday Life," is on my to-buy list today. 

But this idea that some charitable gifts are more "worthy" than others is a non-starter for anyone who cares about donor freedom of choice.  Unfortunately, it is being talked up by numerous social policy wonks around the country and even in Congress.   

The problem, of course, is who decides if a nonprofit is "meritorious" enough?  The IRS?  Congress?  Sure, most of us could argue that helping the poor, who need assistance, is more important than helping Harvard, with its $30 billion endowment.  But why is helping the poor more important than, say, rescuing stray animals?  Or funding medical research?   Or cleaning up a creek?

Even if we expend the idea of "public benefit" to include the above examples, what happens when the money goes to a "public benefit institution" but doesn't get spent on a public benefit.  My favorite example is money going to United Way which then spends it on public service announcements reminding us to talk to our children.  This is a "public benefit?"

Yes, it might be great if the wealthy were more generous to the poor and less generous to the arts, but I suspect meddling in the giver decision-making process would result in less money to both the poor and to the arts.  Like they say, the devil is in the details, and the path to hell is paved with good intentions.

The real question is whether, as a matter of public policy, gifts to nonprofits should be tax-deductible at all.  Who wants to tackle that one?    

Comments

[Dick Lawson]

I always enjoy Patrick's comments as they are consistently provocative and often entertaining. However, this particular offering reminds me of what is often said about accountants--they know the cost of everything and value of nothing. Perhaps Patrick is an accountant. It seems he's saying helping stray dogs is the moral equivalent of saving the dying in Darfur. This logic says Maslow was out to lunch: a Twinkie is just as important as air. As people have a hierarchy of need cultures have a hierarchy of values. If we don't know the answer to the question, "Why is helping the poor more important than helping stray animals" then we should stop using the word philanthropy.

[Susan]

Thank you, Mr. Lawson. Very well said.

I agree that Patrick Maguire surely must mean well. But sadly, his statements do reflect a lack of overall understanding of charitable giving.

Robert Reich has made an excellent suggestion. The world of nonprofit has very little regulation. This is but one small way to defund nonprofits that are merely functioning as tax shelters.

[Kylie]

I totally disagree. By saying "If we don't know the answer to the question, "Why is helping the poor more important than helping stray animals" then we should stop using the word philanthropy." we are placing judgement on other people's values and morals, which takes away from donor choice. If I personally believe that helping stray animals, who have no way to help themselves, is more important than helping poor people, why should the government decide that my donation, to a cause I believe in, is not as worthy as someone else's?

[Dick Lawson]

Kylie's response reminds me of the book "Men are from Mars and Women are from Venus." Perhaps the issue is we're looking at the topic from different angles. My thinking is that if donor intent trumps everything else then we as fund raisers can cash in our brains and our souls while we are at it. My life and time are too valuable to me to spend it on sentimental issues. My primary concern in fundraising is to change the world, not to make donors happy. People come first, period. Philanthropy = brotherly love for people.

[Joe Sica]

You're funny Dick. Do you really believe Philanthropy ="s brothery love for people? I think it is more like "promoting human welfare". I think that broadens the topic enough to include Harvard and yes, even the animals, if indeed the betterment of the human condition is served by promoting whatever cause via charitable giving. I think we're caught in the examples more than Patrick's intent. I think Susan's comments that Patrick does not understand charitable giving really deserves a big "HUH?". I don't need to sing his praises nor is he perfect but the man has pretty much defined campaign giving more than anyone nationwide. His point is merely just as he says "the devil IS in the details here". When does regulation have counter effects? Always. Shutting down and narrowing any definition of giving will indeed give current and potential givers much pause. If we legislatate who to give to (and that's what tax breaks do) we seriously flaw the giving mind. Simple point. This is not about Fido.