Illogical Deductions

The tax credit trap

Virginia Postrel from the April 1995 issue

(Page 2 of 2)

Take a notion circulating in the intellectual circles around Gingrich: giving taxpayers a credit for donations to charities designed to help the poor, as an alternative to welfare. This sounds like a clever plan. But it has serious problems.

First, it assumes that earning a living in America means you have a obligation--not out of empathy or ethical conviction but out of fear of prison--to contribute some of your earnings to "the poor," through either the government or a private charity. And it assumes that the best way to help poor people is to give them money or services through nonprofit or governmental organizations--not to hire them, buy from them, or help educate their children, to suggest just a few alternatives. Both of these assumptions are decidedly arguable propositions.

And the pragmatic considerations are daunting: Who gets to determine which organizations deserve the credit, using what criteria? If I give money to Doctors Without Borders, which does relief work around the world, does that count, even though it doesn't help Americans? What about educational institutions? Don't they help the poor? And what about religious organizations, the greatest recipients by far of Americans' philanthropic dollars--must they keep separate books on their "spiritual" and "secular" activities? Won't the credits-for-charity scheme distort the tax code in favor of the social gospel?

Ever since the early '80s, the accepted Republican alternative to every alleged social problem, from health care to child care, has been some kind of tax credit or super-IRA. Certainly, letting people keep more of their own money is not the same as loosing regulators on them, nor is it the same as doling out other people's money in return for favored behavior.

But the deal the Republicans offer is troubling: Spend on the right things, and you get to keep your money. Spend on the wrong ones, and you send more of it to Washington. That sounds good to people who don't like taxes, which is to say to nearly everyone. But, while it may reduce some people's taxes, it does little to roll back federal power. It leaves Congress in charge of kitchen-table priorities.