Skip to main content

Why should you get a tax deduction for your charitable gifts?

Believe it or not, that question is being asked by people in positions of influence. Even by some members of Congress. They aren’t suggesting that charitable gifts should stop. But, they have a few ideas that may surprise you.

For example, David Booth recently made an eye-popping gift of $300 million to the University of Chicago Business School. The school will use the gift to recruit and retain the best faculty members and to expand its research programs. Booth is the founder of Disciplined Growth Investors, the successful investment firm that bases its strategies on what Booth learned as a University of Chicago graduate student. It is no surprise that he chose to make this gift in gratitude and to help the school continue its impressive academic tradition. From investment strategies to medical therapies, the things discovered, taught and learned at the University of Chicago and countless other schools improve life for all of us.

How else could you view this gift? Some look at it and note the large endowment already in place at the University of Chicago. They may focus on the narrow group of business school students and faculty who will directly benefit from the gift, mostly from relatively affluent backgrounds. Then, they may contrast the huge, immediate impact that $300 million could have on a nonprofit organization that provides social services, such as assistance for the homeless.

The idea of prioritizing charitable gifts is gaining ground. Some argue that giving incentives through tax deductions is not necessary for a place like the University of Chicago, which can more easily attract money. Instead, tax deductions should be reserved for others. What’s more, limiting the charitable deduction could be a way to increase revenue for the government.

A few members of Congress are now even referring to charitable gifts as “subsidies” and “earmarks.” This suggests that because the gifts are subject to charitable tax deductions, they have become public money. Public money rightly comes within the control of the government. And at that point, respect for donor intent gives way to the direction of our elected officials.

If this makes you uneasy, it should. We all decide differently about how to make charitable gifts. But, respect for donor intent, regardless which charitable priorities a donor may choose, is fundamental in a democratic society. Donor-advised funds at CFT are a great example of that. When someone else can tell you the priorities for your own charitable giving, it stops being your own charitable giving. And, charitable giving is vital to our country.

That’s why CFT is helping to fund a new economic study about the effect of all charitable dollars. What the study has found is that each $1 invested in a public charity produces an average $8 return in direct and indirect benefits to society. Of course, that includes gifts to social-service agencies, but it also includes the other charities, such as hospitals, schools, and organizations for the environment and the arts. Each effective nonprofit plays an important role in our society. We need to encourage more charitable giving, wherever a donor’s interests may lead—not just to the current priorities in the Congress.

Brent E. Christopher

President and Chief Executive Officer

Read More