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Charitable tax credits promote giving

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KAI RYSSDAL: If karma worked perfectly every dollar you gave would go directly to the people you want to help, but we all know that's rarely the case. Today in Washington a congressional committee spent some time on military charities .The American Institute of Philanthropy says those organizations could be better at what they do. Twelve of the 29 military charities it reviewed got a failing grade. As our series on philanthropy continues, commentator Hunter Lewis says there's more the U.S. can do to make giving more affordable.

HUNTER LEWIS: If we were really serious about ending poverty in America, what would we do?

Rely solely on economic growth? On government programs? On a mix of private and public, the so-called "Third Way?" Let's consider a Fourth Way.

We hear a lot about social entrepreneurship. This means running a nonprofit more like a business. Social entrepreneurs are making a big difference, but they still lack capital.

Nonprofits today represent only a small sliver of the economy. We could change this by making charitable giving more affordable.

At present, when you donate to charity you take a tax deduction. If you are in the 25 percent tax bracket government will reimburse 25 percent of the value of the gift. Most of it still comes out of your pocket.

Let's have charitable tax credits as well. With tax credits you could take a charitable gift off your taxes dollar for dollar. You would have a simple choice. Pay it to government or give it to charity. This could produce a torrent of cash for charities.

At first this might apply only to charities working directly on the ground to help the poor. In the long run government might outsource all its social programs to a much larger nonprofit sector.

The charitable tax credit approach could help new business entrepreneurs, too. They could donate shares to charity in lieu of taxes. This would leave more cash to grow their business faster and create more jobs.

Charitable tax credits would also make sense for estate taxes. Estates represent a lifetime of saving, and we need savings in America today. By using tax credits we could steer more estates into charitable endowments. That would protect the savings.

The American political argument is usually framed in terms of having more or less government. Let's try something new. Let's expand the nonprofit sector, and bring more hope and help to those who need it.

KAI RYSSDAL: Hunter Lewis is the author of "Are The Rich Necessary?" He's also the co-founder of the global investment firm Cambridge Associates.


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