Whose Money Is It, Anyway?

Ezra Klein approvingly quotes Robert Reich suggesting that we should, in effect, end the tax exemption for charitable donations, and adds some commentary of his own:

"I'm all in favor of supporting the arts and our universities," writes Robert Reich, "but let's face it: These aren't really charitable contributions. They're often investments in the lifestyles the wealthy already enjoy and want their children to have too. They're also investments in prestige -- especially if they result in the family name being engraved on the new wing of an art museum or symphony hall."

Agreed. The tax deductibility of charitable donations to private universities, the arts, and so forth are a bit of a scam. This year the Treasury will forgo $40 billion in tax revenue due to the deductibility of philanthropic donations. That makes sense when the money is going to feed the poor -- but studies show that only 10% of charitable donations go directly to the poor. And there's no reason the rest of us should be subsidizing an I-banker's desire to fund a named chair at his alma mater and, oh yeah, help his kid get into the school to boot.

Additionally, charity has become something of a lifestyle, with large donations buying you entrance into concerts, gala dinners, special exhibits, networking events (see Global Initiative, Clinton), and much else. In such cases, charitable donations are closer to purchasing tickets than selflessly and anonymously giving up private wealth for public ends. "Awhile ago," says Reich, "New York's Lincoln Center had a gala supported by the charitable contributions of hedge-fund industry leaders, some of whom take home $1 billion a year. I may be missing something, but this doesn't strike me as charity. Poor New Yorkers rarely attend concerts at Lincoln Center." And they shouldn't be subsidizing those who do.

The unspoken assumption here is that Klein believes that peoples' money does not belong to them, but rather to the government. In other words, allowing people to channel their money to the programs they'd prefer to improve should be disallowed.

So here's a question for Klein/Reich: the government taxes citizens to pay for all sorts of programs, including funding for the arts and education. The government, in fact, pays for a lot of arts and education programs which primarily benefit the relatively wealthy. Why are they better at distributing that money than individuals, for whose interests the government is (presumably) acting?

Not only that, but who gets to decide what is a "real" charity and what isn't? A lot of "real charities" -- e.g. food banks and homeless shelters -- are run by religious groups who use the opportunity to proselytize. Should they be exempt, since the government isn't allowed to endorse religions? What if one wishes to donate to a relatively wealthy public school in Manhattan? Should the gift be refused tax-exempt status because there are poorer schools in Queens?

Who cares if some of the reasons people donate are self-serving? The point of the exemption isn't to boost some particular charity over others; the point is to give citizens more direct control over where their money ends up. That is a fine end unto itself, and one that Klein/Reich don't even consider.