Charity Tax Credits: Corrupting Compassion

When Marvin Olasky wrote The Tragedy of American Compassion (1992), he offered a vital and challenging idea: that the traditional wisdom of aiding the poor has been forgotten. Modern charity as practiced by both the government and the private nonprofit philanthropy is permissive and often destroys rather than aids the poor.

Since then, conservatives have tended to distort this robust idea into another theme that is more comfortable but false: Government welfare is largely bad and private-sector charity is largely good. This is simply untrue.

Although there are a few sound conservative organizations helping the poor, the bulk of nonprofit private charities serving them are more liberal and more permissive than their counterparts in government. Any criticism I have every written about government welfare applies doubly to nonprofit charity.

The advocates of a charity tax credit are thus proposing to expand the most retrograde and corrupt part of the welfare system. They propose a trade-off: Reduce government welfare spending and re-channel money through the tax code to private nonprofit philanthropies.

In reality, it will not work that way. The philanthropies they seek to subsidize are nearly unanimous in their claim that the United States must spend more on the poor. If a charity tax credit is created, it will not replace government welfare, but will merely be added on top of the vast existing welfare system that already absorbs 5 percent of GNP.

Moreover, public-sector welfare has one important advantage over private charity: Government funds are rarely used to intervene in the political process. Not so for private philanthropy. Indeed, most liberal and moderate charities believe that the noblest deed they can perform on behalf of the poor is to lobby for greater government welfare spending and expanded state power. In a recent hearing before the House of Representatives, the chief lobbyist for Catholic Charities stated that, in the view of her organization, the best charity activity was voter registration!

Tax-credit proponents do call for a ban on the use of tax-subsidized charity funds for policy advocacy. But this ban has no chance of survival in the long term. Whenever similar charity tax bills have been introduced in Washington, the entire philanthropic industry has been mobilized to remove any ban on advocacy. Indeed, most bills deliberately include policy research and advocacy as a "service to the poor" worthy of subsidy.

Most of the liberal agenda, from civil rights to environmentalism, is already packaged as service to the poor. Under the tax-credit proposal, those seeking to raise taxes to expand the food-stamp program get a potent tax cut, while supporters of a balanced budget do not. Advocates of expanded welfare, Head Start, and a hike in the minimum wage get a tax break not available to advocates of Star Wars and the flat tax. Backers of affirmative action to help disadvantaged groups get a subsidy, but opponents of affirmative action do not. Virtually every liberal cause gets a subsidy while conservative ones do not, unless they twist their message severely in order to accommodate a left-leaning ideological litmus test.

The charity tax credit is a liberal fundraiser's dream: a potent tax break available primarily to those who have and advance liberal ideas. It will lead to a tax code that subsidizes liberal speech at the expense of conservative speech.

Tax-credit proponents say they want to create a marketplace for charity, permitting individuals to choose where their monies go. In fact, they do neither. Their proposal is narrow and corrupt because it mimics the core premises of the War on Poverty. Their idea of "charity" bows in obeisance to the liberal icons of guilt, victim worship, envy, and indulgence. It is divorced from true benevolence. To mention one example among a thousand: tax-credit proponents would subsidize hospice care for the indigent terminally ill, but not donations for medical research to cure diseases. This is a very bad idea.

If we wish to strengthen civil society, reduce government, and combat moral deconstruction, we should consider enhanced tax relief for all philanthropic giving, not merely the narrow leftish aid to the "poor" envisioned by tax-credit proponents. Such an alternative would foster true benevolence, rather than a stale repeat of the War on Poverty.

A longer version of this essay first appeared in the January/February 1998 issue of Policy Review, published by The Heritage Foundation.

Robert Rector is a policy analyst at The Heritage Foundation.