Re: Tax-Credit Vouchers

by Robert VerBruggen

With this post, I’m dropping out of the tax-credit-voucher debate. I think I’ve clearly expressed my view of the matter in too many posts; I’m just retreading ground and wasting PBC pixels. If some libertarians want to keep insisting that there’s a meaningful difference between (A) the government spending $500 on something and (B) a person “donating” $500 to that thing and then getting a $500 break on his taxes in return, there’s nothing I can do to stop them.

So, I’m going to link to Adam Schaeffer’s latest, and point out that while its hook is my most recent post on the topic, most of it is actually dedicated to an old post. That post is about whether we should voucherize charitable giving rather than giving people tax deductions for it; Schaeffer had claimed that my opposition to tax-credit vouchers entailed support for this “modest proposal,” and I agreed with some significant reservations. (I noted, for example, that it could create a sort of charity entitlement if handled on a one-person-one-voucher basis, which he spends considerable time pointing out as if it’s a fresh point.)

He also selectively quotes this post, to the point of misquoting the substance — “much (most?) deducted charity spending does not offset government spending in the slightest” becomes simply “charity spending does not offset government spending in the slightest,” and the following text responds to the inaccurate quotation, not the actual argument I made. That deserves a correction. [UPDATE: Thanks to Schaeffer for correcting the error.]

In response to Schaeffer’s question of which deductions I would eliminate, I would say: Start with the deductions that clearly don’t offset government spending. Deductions equal government funding, because they allow people to redirect some of their tax money to other purposes (they do not have the option to “keep” it, only to pay it in taxes or donate enough money to get it back via a deduction). Therefore, you should not be able to deduct expenditures that the government would not make itself.

Of course, what I originally suggested — eliminating all charitable deductions — isn’t going to happen, and (as I noted in the original post) ending the current system would eliminate the incentive (subsidy, rather) that deductions give. Thus, Schaeffer is right that this would be better if coupled with the elimination of the welfare state; otherwise, the decrease in donations could drive more people onto welfare rolls. But we have no way of knowing (A) how much giving would decline or (B) how many people are currently eligible for government programs but don’t use them only because private charity is available. And thus we have no way of knowing whether my ridiculous response to Schaeffer’s ridiculous question would in fact be catastrophic if implemented, which is a shame.

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