Charity Tax Credits - and Debits: As Welfare Wanes, Conservatives Clash over Whether Government Should Subsidize Private Giving

By Barwick, Peter S.; Matthews, Merrill, Jr. et al. | Policy Review, January-February 1998 | Go to article overview

Charity Tax Credits - and Debits: As Welfare Wanes, Conservatives Clash over Whether Government Should Subsidize Private Giving


Barwick, Peter S., Matthews, Merrill, Jr., Rector, Robert, Arnett, Grace-Marie, Carlson-Thies, Stanley W., Policy Review


Welfare reform, by shattering the notion of government-funded dependency, represents one of conservatismAEs great victories in recent years. It also presents one of the movementAEs toughest challenges: If government is not to be the safety net of first resort, then what is? If charities and other private agencies are the alternative to the failed welfare state, then how can we effectively shift resources in their direction?

Charity tax credits are emerging as one of the most important--and most hotly debated--responses to that question. Most versions give either a partial or a full tax credit for donations to organizations whose primary purpose is fighting poverty. Unlike a deduction, the credit would be applied directly against a personAEs tax liability.

The Renewal Alliance, a caucus of 30 members of Congress committed to the promotion of civil society, has chosen a charity tax credit sponsored by Senator Dan Coats and Representative John Kasich as one of its three principal legislative priorities for 1998. The Coats-Kasich bill would provide a credit of up to $500 per family at a cost to the Treasury of $23 billion over five years, according to the Wall Street Journal.

Apart from the question of how to pay for it, the charity tax credit has been criticized by a number of conservatives who fear that it will skew charitable giving toward direct provision of services rather than character-building institutions, and that it will amount to a taxpayer subsidy of public-policy advocacy by (mostly left-wing) charities.

In Pennsylvania, a bill was recently introduced to establish a state-level version of the tax credit concept. Drafted with help from the Commonwealth Foundation, the legislation offers a 50 percent credit for donations to charities that directly help the poor. It also tries to address many concerns of conservative critics.

The creditAEs advocates often urge that charitable tax credits be financed by dollar-for-dollar reductions in government welfare spending--thus directly transferring resources and responsibility for poverty-fighting from the state to civil society. However, the Pennsylvania proposal for a charity tax credit does not include commensurate reductions in government spending.

Everyone agrees with the ultimate objective: to encourage taxpayers to become more generous and more savvy in their charitable giving. Will the charity tax credit become the legislative fulcrum on which the culture of caregiving in America will be shifted? Or will it play into statist assumptions about government and civil society?

Peter S. Barwick

ItAEs time to transfer resources from failed government programs to private charities that are reclaiming lives

The recent dramatic decline in the nationAEs welfare rolls is attributable in large part to the practical and psychological impact of reforms intended to create a more "conservative" welfare bureaucracy: expanded work requirements, eligibility restrictions, and a lifetime limit on benefits. These long-needed reforms are changing the culture of welfare from one of entitlement to one of reciprocity and individual responsibility.

ItAEs time to take the next step. Conservatives should use the momentum generated by recent successes to move toward the ultimate goal of reform: shifting responsibility and resources from the welfare state to privately funded, local charities.

The best way to recover the role of private charity is through a charity tax credit, implemented initially at the state level. Its aim is simple: to give citizens greater control over their tax dollars by allowing them to claim a credit against their personal income-tax liability for contributions made to charitable organizations that assist the poor. The ideal plan is a charity tax credit that is budget-neutral--that is, one in which public spending is reduced by the same amount credited to taxpayers. This would ensure that resources are transferred from ineffective government programs to private charities that successfully reclaim lives. …

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