New at Reason

Tim Cavanaugh | December 23, 2004

Ted Balaker chokes on the new tax code rules for donating vehicles to charity.

Comments

|12.23.04 @ 3:43PM|#

That is just plain whack. Our government really has our best interests in mind, don't they?

|12.23.04 @ 5:26PM|#

I'm actually in the process of donating a car right now, due in large part to the change in tax law. While in a certain minimal sense it has lit a match under my ass to do something about the old VW collecting bird poop in my garage, I'm surprised there hasn't been more of a media outcry over the taking of food from the mouths of homeless men and battered wives, which is exactly what this law does.

I tried at first to give it to a local food pantry, but they couldn't take it because they can only afford one new car battery a year and they had already bought one for another vehicle; mine will need at least a jump, if not a new Die Hard. But to the Feds, they're just rolling in the lucre, the bastards.

So instead I went with the American Cancer Society. A good group, no doubt, but the new law certainly underscores the shoestring budgets on which many of these local nonprofits run. What's compassionate conservatism again?

|12.23.04 @ 5:43PM|#

Nice Piece Ted,

Just more tinkering with the tax code. As I said, or actually as Sam Kinnison said, "it never ends".

|12.23.04 @ 7:49PM|#

In my town, a local group accepts cars, then turns its auto-repair classes it trains loose on some of them. The cars are sold on its own used car lot. Not only do people support this non-profit by donating, but the vehicles serve as raw material for programas that get people into a good career. Used car buyers get a bargain, too.

http://www.esperanzaunida.org/services/usedsales.htm

I expect that, since they don't just auction the cars, their donation value may not be as degraded by the new IRS diktat. The Feds shouldn't have changed the rules, but there are work-arounds, I'd imagine.

Kevin

|12.24.04 @ 5:55AM|#

I am not really sure that anyone should get a deduction ever for anything. Shouln't you giving to charity really be your choice to give to charity? Anything else is welfare.

|12.24.04 @ 8:21AM|#

I am not really sure that anyone should get a deduction ever for anything.

Are you suggesting a flat tax? Then I'm all for it. In the meantime, if we're going to social engineer, I'd rather see money and cars go to shelters and vocational-training nonprofits than to feed the Behemoth.

|12.24.04 @ 6:28PM|#

kwais,

No deductions? For anything?

I suggest one deduction. Your entire gross income gets deducted from, well, you're entire gross income and that leaves you with a taxable income of ZERO.

Ravi|12.25.04 @ 12:02AM|#

I actually think this new regulation is welcome. When there are ads on the radio for charitable car donations that were borderline invitations to tax fraud (e.g. ads that emphasize the size of the tax break you can get for an old clunker - when your old clunker isn't worth much in the first place, ads that say you can do better than you would by selling - impossible unless the value of the car is inflated by more than one over your marginal tax rate, ads that imply donating the car and valuing it yourself - an invitation to inflate the value of the donation, ...) I think something needs to be done. Is the regulation perfect? Certainly not. But I think it is far more justified and balanced than this piece suggests.

|12.25.04 @ 5:16AM|#

TWC,
I am with you. I don't think there should be an income tax. I am not sure exactly how the government is supposed to be funded.

I am thinking sales tax. But then sales taxes are hidden. I would like some way that Americans see their taxes, so they can be outraged when they get too high.

However given that their is an income tax, their should be no deductions. Social engineering is wrong.

Slaq, a flat tax would also certainly be better than what we have now also.

|12.27.04 @ 1:52PM|#

I think Ted underplays the issue, and Ravi hit it right. I don't have exact numbers here, but I recall a recent study that showed the average car donation value at $3,000, and the average receipt to the charity at $36.

See the charity doesn't want your car. The charity doesn't need your car. They arbitrage the disparity between that $3,000 deduction you take against the $36 they get. The charity wants that $36.

Between your car and the charity are many profit making enterprises. One picks up the car, another brings it to auction, a third wholesales the car at auction. These so called $3,000 cars might have sold for that if you fixed them up, detailed them, and marketed them. But without those actions, they sell for an average of $600. That sales price is netted against all exepenses, and the remaining $72 profit is split half to the charity and half to the business.

Don't give Reason� cars, give cash!

|12.27.04 @ 5:18PM|#

It would be smart if the United Way or some other common appeal in your area would get behind a program like the one I referenced above. People could donate a car, even designating which charity they'd like the profits to go to, and it could be worked on until it could be sold for a good price. Another good side effect would be that beater used cars so repaired and tuned would pollute less. Most auto air pollution comes from the minority of older cars on the road. Heck, even giving those old cars to job seekers who can't afford one would be cheaper than spending $billions on mass transit systems.

Anything too far gone to repair could have any good spare parts harvested, then get sold for scrap.

Kevin