The central issue surrounding the charitable deduction is not eliminating tax benefits for the wealthy. To the contrary, the real issue is how much our society values charity. As a country, in 1917, our lawmakers made a statement that they wanted to encourage charity—not penalize it. Throughout the world, America is known for its charity. In times of crisis or calamity, people have looked to America to provide aid and relief, and we have responded. At a domestic level, the United States is known for the strength of its charitable organizations that provide everything from afterschool education to care for addicts and the elderly.
There are some who might contend that perhaps the government is the best director of all charity, and thus perhaps it is the government who should provide the care and services currently being provided by our nation’s nonprofits. However, even a cursory glance at this supposition fails.
In a paper titled “Private Charity vs. Government Entitlements,” David Longstreet points out that the government spends seventy cents of every dollar on administration for government entitlement programs. On the other hand, Longstreet notes that groups like Charity Navigator tell us that private charities spend, on average, just 10 percent of their budget on administration. Even if fundraising costs of 8 percent are added to the mix, private charities still only spend 18 percent on overhead. If Charity Navigator were evaluating government programs for fiscal effectiveness under its five-star rating system, those programs would receive zero stars.
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