"Far from being non-consumption, giving is a particularly high-quality form of personal consumption." (HT:KL/TH/AI)

http://www.economist.com/node/21556570

Sweetened charity

The idea that the state should subsidise giving to good causes is resilient, but not easily justified

"There was little debate over exempting charities from income tax when it was first introduced in Britain, supposedly as a temporary measure to finance war with France, in 1798. This seemed fitting, as charities had already been largely exempt from earlier taxes on property since the Elizabethan age. Likewise, there was little opposition in America when in 1917, four years after the federal government gained the constitutional right to levy an income tax, American taxpayers were allowed to deduct charitable donations from their taxable income (again, extending precedent established in the 19th century). A year later, Americans were granted, at death, unlimited deductions for their charitable bequests from the new estate tax.

Some economists say this can be justified on the basis that taxable income should include only personal consumption and wealth creation, and money given to charity is arguably neither. This was the implicit logic behind the development of deductible donations in Britain in the 1920s, when donors began to covenant part of their income to charities, and thereby avoid paying tax on it.

Rob Reich of Stanford University offers a robust counter to this view. “If a person has legitimate ownership of resources and can rightfully decide how to dispose of those resources, then whatever a person decides to do with those resources—spend it on luxury goods or give it to charity—is, by definition, tautologically, consumption.” It is demonstrably true that people derive pleasure from their donations. They may also earn benefits that are hard to come by through other means and peculiarly prized—social esteem and status, for example. Far from being non-consumption, giving is a particularly high-quality form of personal consumption."

Jun 9th 2012 | LONDON AND NEW YORK