By all means, the United States should preserve the federal incentive for charitable giving, but we should make one small change. We should take the incentive out of the tax code and, instead, send a check to those who make gifts to eligible institutions.
Currently, if you make a gift of $100,000 and you are in the 35 percent tax bracket, your tax deduction is $35,000. In the future, you wouldn't get the deduction; instead, we the people would send you a check for $35,000.
Under the current system, the lower your tax bracket, the lower your deduction. If you make a gift of $100,000 and you are in the 15 percent tax bracket, you get a $15,000 deduction. Under the new system, you would get a check for $15,000.
Where will we get the money to write these checks? The same place we get the money to pay for the deductions: the American taxpayers.
With this small change, the transactions would be transparent. Congress would have to appropriate the money. It would be part of the budget, not an under-the-table transaction with no accountability.
Some might say the current system seems perverse, increasing the incentive for charitable gifts as your tax bracket increases. Well, that appears to be the way we like it. Many have argued to protect the charitable-giving provision in the tax code. As far as I can tell, no minds have been stirred to ask, "What are we doing?"
* * *
Paul H. O'Neill, Sr., was U.S. Treasury secretary from 2001-2002.
The Opinion section is produced by the Editorial Department to foster discussion about key issues. The Editorial Board represents the institutional voice of the Star Tribune and operates independently of the newsroom.