Generous perks for big givers depletes coffers

It almost seems a contradiction, but we have way too many charitable organizations for the good of the country — and the good of the ordinary American family.
The number of charitable organizations — defined as those which don’t pay taxes and who can give tax breaks to donors — has climbed more than 60 percent since the turn of the century and now sits at 1.1 milion.
So why is that a bad thing? Doesn’t it speak well for the goodness of our hearts and the properness of our priorities that so many of us want to do good that it takes more than a million organizations to channel our worthy yearnings?
Well, yes and again, no.
The fact is that the Internal Revenue Service, which has the responsibility for determining whether the application by the Register Reapers of Righteousness should be granted 501 (c) (3) status, would probably mail us back a certificate without giving the matter a second thought. A new public charity wins tax-exempt status every 10 to 15 minutes, according to a study recently made by a batch of Stanford University students.
And, boy, does that cost the U.S. treasury a bundle. The $300 billion donated to charities last year cost the federal government more than $50 billion in lost tax revenue.
With an eye for the unusual, the students found such examples as the Woohoo Sistahs, a social group in the Hampton Roads area of Virginia that meets over drinks and dinner every once in a while and raises money for such worthy causes as fighting breast cancer. A couple of other non-profits established recently spend their energies rescuing wild donkeys threatened with extinction and still another will raise money to ensure a “chemical free” graduation party at a high school in Monticello, Minn.
So who suffers when Mrs. Gotrocks gets a tax write-off by giving big bucks to save jackasses (the long-earred kind)?
Tax-free giving is just one more way that the haves live different lives than the have-nots; one more reason why the overall tax burden must be greater than it otherwise would be.

CRITICS WORRY that tax exemptions are being given to unworthy organizations. It really makes no sense to have a permit system if only .5 percent of the applicants are rejected, they say. The IRS should get tougher, is the message.
Timothy Delaney, chief executive of the National Council of Nonprofits, said cracking down would be extremely complicated. “What are we going to do,” he asked. “Have some bureaucrat establish a quota for arts organizations? Or after school programs?”
Mr. Delaney is right. A simpler, fairer, approach would be to reduce the percentage of a donation that would be tax exempt. To make the system work more evenly, the amount of the deduction could be reverse-indexed to the tax rate so that the wealthy didn’t benefit more from being generous.
The goal should be to increase the net tax flow to the government and thereby reduce the amount needed from the public or increase the amount of goods and services government could provide to all the people.
In an ideal world, there would be no charitable deductions. Not because charity is not needed or admirable; it is both. But because contributions to worthwhile causes should be made because they are worthwhile, not because it costs less to give than it does to spend.
This is not an ideal world. We’ll settle for small steps toward equity.

— Emerson Lynn, jr.