Michael Strain, resident scholar at the American Enterprise Institute (AEI), wrote a terrific column in today's Washington Post stating his argument to end tax expenditures – provisions in the tax code that grant special treatment through deductions and exemption – and spend some of the added revenue on programs that encourage work and reduce poverty. Count my vote for that!
However, he makes two exceptions:
We should move the tax code away from spending money on high-income Americans. The best way to do this would be to examine the list of tax expenditures, item by item, and eliminate (over time) the ones we don’t like. For example, I would phase out the mortgage-interest deduction and the tax exclusion for employer-provided health care but would keep the tax deduction for charitable contributions and the child tax credit.Why? Because charity begins with a tax break? Because the childless should be taxed at a higher rate?
I'm not trying to be flippant or cruel, but if you make some people more equal than others it opens the door for those whom legislators deem more equal. (BTW – I mix up my reads with differing points of view and am familiar with the AEI's thinking on the charity and child tax breaks.)
As Mr. Strain explains, it is the rich who benefit greatest from tax breaks: "more than half of the tax benefits from the 10 costliest tax expenditures were enjoyed by households in the top 20 percent." That relationship doesn't break down for kids and charity.
So if we're trying to help poor kids let's go with conditional cash transfers to their parents, not a tax break. As for charitable giving – and all 501(c)whatevers for that matter – why should my tax rate be higher because you chose to give to your favorite philanthropic organization, one that may not share my values? And who "picks the winners" for charitable organization designations? Who deems those organizations goals and activities worthwhile?
I agree with economist Justin Wolfers that Mr. Strain's column is excellent. And I know that charitable giving is an emotional issue. (When I ran for Congress in 2012 one gentleman refused to sign my ballot petition because I didn't support that tax break.) But rich people can afford kids and picking charities is fraught with risk. Let's make a clean break from tax expenditures and swat the pests all at once.