Exemptions for Charitable Donations

The practice of allowing exemptions for charitable donations can encourage  wealthy people to fund public projects such as museums, universities, libraries, parks, and other public buildings.  Currently, tax payers can deduct 50% of charitable donations from income, to avoid paying income tax on that amount. A tax-payer who pays roughly 40% on the top tier of his/her income, diverts approximately $2,000 from the government to the charity with a  $10,000 donation.   If the exemption amount were 100%, then approximately $4,000 would be diverted from the government to the charity with a $10,000 donation. Charities can play a similar role as government, insofar as they may help those less fortunate or contribute the community enrichment, but  with a donation, the tax-payer has more control over how the money is spent.

Charitable organization are under IRS control but can be as irresponsible and corrupt or even more so than government bureaucracies.  Making charitable organization publish detailed income and expense reports online might help. IRS rules for charitable organizations could be changed, constraining them so that they do not give administrators and directors lavish salaries and speaking fees.   Such exemptions might not apply to foreign charities that have a history of diverting funds for political manipulation.

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