Government expansion undermines charitable giving by shifting private investment in innovative social enterprise to inefficient government programs, a new publication says.
The philanthropic sector “will see its productivity drained as private dollars that would have been spend by charitable and philanthropic entrepreneurs are channeled instead into the hands of politicians and bureaucrats who may have short-sighted needs,” says the publication by the Washington Legal Foundation, an advocate for free markets and limited government.
Beyond the immediate cost in dollars lost to philanthropy, greater spending by government also creates waste, says “Crowding out Private Money: Why a Growing Government Undercuts American Philanthropy.”
“Innovation and efficiency are the hallmarks of independent entrepreneurs, not the federal government, and that is especially true in philanthropy, says the publication, which was written by Scott Walter, a special assistant to the president for domestic policy in the administration of George W. Bush, and by Sandra Swiski, a tax-lawyer and co-founder of Venn Strategies.
Other threats to philanthropy, it says, are ongoing efforts in Congress to reduce the charitable income-tax deduction, along with a possible increase in tax rates for the wealthiest Americans and a proposed cut in the itemized deductions they can claim.
“This drain on upper-income taxpayers will have a significant effect on philanthropy because households whose wealth exceeds $1 million (roughly 7 percent of the population) provide around half of all charitable donations,” the publication says. “Taking more money out of these Americans’ pickets, in short, means less money for charity.”
With relatively small investments, donors can “leverage breakthroughs otherwise unobtainable by government or industry,” the publication says. “The bad news is that government’s failure to appreciate the value of the philanthropic sector may bring significant harm to a critical pillar of American civil society.”