PK is right, JRod. I'm not suggesting there if taxes were x dollars lower, donations would be x dollars higher. But there is no question that if people had more wealth they would use some portion of that marginal difference for charity...if for no other reason than to realize the income tax benefits!
I work as an estate planner and I'm an advisor to the board for a 501(c)(3). I deal with this every day. People plan for bequests or set up charitable remainder trusts and would like to fund more, but they can't becuase of they are either on a fixed income or haven't got the disposable income to make a more sizeable charitable donations realistic. The people I really feel bad for are those who come to me via accountant referrals who need to minimize their income tax liabilty by finding charitable deductions but who can't afford to because their debt and expenses are simply too high. This is particularly common in families with 2 working professionals, as they typically have higher student loan debt and higher childcare costs.
Oh and here's a great nugget for you all to chew on. Many charities out there are receiving YOUR tax dollars through government grants or appropriations.
Not nearly as much as you think. And even those that do receive only a small portion of their operating budgets from such funding. And that's before we even address the issue of whether it makes economic sense to have the government apportion those charitable dollars rather than donors.
It's silly for someone to say you can't give more to charity because of a tax burden. Maybe if you are living on a fix income like social security. But maybe one should look at our luxurious spending budget, like gaming.
This is just ignorant, paticularly after my prior post. I work with people all the time who have to give less because of income (or especially capital gains) taxes. I maintain a charitable remainder trust for one client who wants to increase her contribution every year, but she's always treading water because of her income tax liability. And believe me the charity which will receive her donation is not getting a nickely of Federal money LOL
Now proper planning can help people realize tax benefits from their donations, obviously. But I think that most people who donate less than they would because of income tax liability are not those who have the inclination or the assets to do legacy planning.
wco81 wrote:
How do the foundations work? There's talk that some philanthropists are leaving most of their net worth as bequests to foundations. There must be some tax advantages to doing it that way?
There are many different ways to set up foundations, and all of them do indeed confer tax advantages. Most will create some mix of deductions in income, capital gains, gift and estate taxes. Just tonight I gave a workshop on charitable giving through estate planning, which is one of my favorite parts of my business.
But practically speaking most people do not contact an estate planner or accountant before donating. Moreover, those who would most likely feel the benefit of lower income taxes are not those who have the assets or inclination to set up trusts of this sort.