Economist's View: Shiller: Taxes Needn't Discourage Philanthropy

Robert Shiller says tax increases should be accompanied by increased incentives for charitable giving. Do you find this more convincing than I do?:

Taxes Needn?t Discourage Philanthropy, by Robert Shiller, Commentary, NY Times: ...Should charitable deductions be fundamental to financial capitalism? I argue so... We need to accompany any tax increases with an affirmation and a broadening of the tax system?s support of philanthropy.

After a big tax increase on high incomes, people should have an especially strong incentive to give money to good causes: to the needy and to schools, colleges, hospitals, churches, the arts and other purposes. Many such donations reduce the need for government spending, so the deduction isn?t terribly costly to the government. It is also likely to bring entrepreneurial creativity to such causes.

Of course, there are counterarguments: that few people are motivated to work for money that will largely have to be given away, and that it?s natural for people to want to make their families better off from their earnings. But there is an answer to that line of thinking: after one attains a certain level of comfort, greater wealth arguably contributes only to social status, which philanthropy certainly bolsters.

That?s a good reason for national policies that encourage philanthropy. Although it?s natural for people to want high social status, there are ways for high achievers to reach the same relative rank without so much wasteful conspicuous consumption...

Unfortunately, much talk today focuses on just the opposite idea: curtailing the charitable deduction for high-income people, in order to help close the federal deficit. ...

Amid rising concern about inequality, we should focus on how we can improve our tax code and other rules to encourage positive feelings of reciprocity in our society. And we can do it while still giving people incentives to innovate ? and to keep working hard.

Posted by Mark Thoma on Saturday, July 28, 2012 at 03:03 PM in Economics, Taxes?| Permalink? Comments?(13)

Source: http://economistsview.typepad.com/economistsview/2012/07/shiller-taxes-neednt-discourage-philanthropy.html

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