Charitable giving will fall. So?

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I didnt' have a chance to write about it yesterday, but I thought this Washington Post article on Obama's plan to cap charitable deductions was pretty misleading. (But of course I'm biased.) Here's the first paragraph:

President Obama defends his proposal to cut the tax deductions that wealthy Americans can claim for their charitable donations by arguing that the shift would not have an adverse effect on giving, but two independent analyses concluded that the proposal could result in a drop of as much as $3.87 billion for the already reeling nonprofit sector.

The first part of this sentence is not quite right. Obama said that "there's very little evidence that [his proposed change would have] a significant impact on charitable giving." That's not the same as saying there will be no adverse effect on giving. Reducing the available deduction raises the cost of giving, so of course it will reduce charitable giving. (Unless the demand for charitable giving is perfectly inelastic, which it isn't.) The questions are: By how much? And what do we get in return? And is that tradeoff worth it?
 


I take it the Washington Post reporter thinks that the drop in charitable giving will be too much to bear, since the drop is described as "as much as $3.87" billion for a "reeling" industry. But a number like 3.87 billion is meaningless when deprived of context. Much more important is the percent change, and, indeed, a few paragraphs later we learn that the estimates of percent change are between 1.3 and 2.1%.

Whether that's an unbearable decline is a matter of taste, and taste is not a matter of dispute. Someone with very different tastes could say, contra WaPo, that "two independent analyses concluded that the proposal could result in a drop of as little as $3.87 billion for a nonprofit that is flush with hundreds of billions of dollars."

Coincidentally, a piece in today's Washington Post -- an op-ed in which I find much that is agreeable -- describes the same research like this: "total charitable contributions are likely to decline by only about 1.3 percent if the proposal is enacted." Eye of the beholder indeed.


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Conor Clarke is the editor, with Michael Kinsley, of Creative Capitalism. He was previously a fellow at The Atlantic and an editor at The Guardian. More

Conor Clarke is the editor, with Michael Kinsley, of Creative Capitalism, an economics blog that was recently published in book form by Simon and Schuster. He was previously a fellow at The Atlantic and an editor at The Guardian. He is also on Twitter.
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