Luke Gedeon

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The most fundamental and basic concept in economics is scarcity, but if anything is scarce in today’s economy, it is scarcity itself. China can make millions of anything you could possibly want and America can print trillions of dollars to pay for it. Not to mention, millions of millionaires, billionaires, and other airs (think airheads that buy the newest technology on day-one – iPhone anyone?).

If the poor are not being taken care of it is not for lack of resources. It is mostly a lack talented people who are willing to make sure the resources are distributed correctly. But that is a whole other post. For now suffice it to say that the government is not hurting for cash.

Which makes this article by Ray D. Madoff so ridicules. (Thanks to Nonprofit Law Prof Blog for the link). Even if giving money to charities actually costs the government anything, they have proven repeatedly that they can make up the difference on press. If you do not like the printing money idea, just keep in mind that the government already has more money than it is able to spend wisely. Trying to find ways to raise or keep more money for the government does not need to be high on our list of priorities.

So now that we have established the urgent importance of the topic – essentially none – let’s explore the possibility that subsidizing charities, no matter how frivolous, increases government revenue. Increases? Umm…. yeah.

See, the government gets a piece of almost every transaction that occurs. The one exception is a charitable gift. And even a gift is immediately spent or directly invested back into the economy. Very few people and no organizations that I am aware of keep large amounts of cash on hand. The more transactions that occur per year the richer the government (and everyone else) becomes. Still it seems that taxing the gifts might bring in more cash from the rich and less from the middle class. But would this actually happen?

If you could just take a percent without changing behavior this might work, but what would happen if we decided to tax charitable contributions? People would stop giving as much and even if they did not, the charities would get less since some would be going to the government. Since they are getting less they spend less which reduces tax revenue at the next step. In the best case scenario, the government breaks even, the charities take a huge hit, and the rich stay rich. Also the rich tolerate higher tax rates mostly because they have plenty of loopholes. If you take away the loopholes they will force congress to reduce their tax rate. You did know that the rich control congress right? Anyway…. It appears that Madoff’s real objection was where the money went.

Most people would love to control where the rich spend their money. Some charities are worthy of receiving large donations and others are not, and who better to make that distinction than the government? Okay, I just punctured my cheek with my tongue, but let’s pretend for a minute that we wanted the government to chose how much money goes to which charity. This would also dramatically reduce the total amount given. Why would anyone work to accumulate huge amounts of wealth if they cannot control what is done with the money? Sad? But true. If you do not have the desire or the drive to accumulate wealth on your own, you are not going to have much say in how it is spent.

Long story, short – people like Madoff should stop saying “should.”

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