Fixing Philanthropy: A Vision for Charitable Giving and Reform

Abstract

Philanthropy means to give for the benefit of others. Unfortunately for philanthropy and civil society, the laws supporting philanthropy are in a state of crisis. More by happenstance than design, the law now caters overwhelmingly to the whims of wealthy donors to the detriment of those in need. We find ourselves with a legal framework ostensibly designed to promote broad-based philanthropic activity, but which is better described as one where the wealthiest get tax benefits that are unavailable to others; claim those (sometimes questionable) benefits while retaining effective control over donated funds; and use the system to advance their policy preferences, avoid scrutiny, and undermine the centuries-old faith and trust that our nation’s charities represent the public good. Although the trends are dire, the article explains how Congress can restore credibility to philanthropy with a number of legislative initiatives, including by broadening the base for charitable giving with an expanded and reformed giving incentive, improving the flow of money to working charities with new rules for donor advised funds (DAFs), strengthening and supporting IRS oversight, and by revisiting some of the rushed through ideas of recent tax legislation (the TCJA).

Keywords: charity, charitable deduction, in-kind contributions, DAFs, johnson amendment, reform, e-filing

JEL Classification: H2, H20, H24, K34