Acton Commentary

Giving Credit Where Credit Is Due


The future of charity in America rests not with government, but with private, religiously motivated activism. In the last decades of the twentieth century, the United States began to rethink its social policies by reconsidering the true nature of compassion and the responsibilities of citizenship. With passage of the welfare reform law in 1996, social policy began to again emphasize personal responsibility and individual accountability over entitlement and excuse. Along with this change came a recognition on the part of most Americans that government may not be the institution best suited to address the underlying problems that bring about poverty.

The focus in Washington and in many state capitals is now on the best way to strengthen the institutions of civil society, especially faith-based organizations that are truly equipped to practice what compassionate conservative Marvin Olasky calls " effective compassion ". Unlike impersonal bureaucracies, faith-based organizations consider the unique situation of the individual or family in need before providing assistance. Thus, along with assistance comes expectation and self-respect. Dependency is not promoted but rather genuine independence, as spiritual, as well as material needs are met.

Many civil libertarians and strict separationists view direct government grants to faith-based social service providers—one major facet of President Bush’s "rallying the armies of compassion"—as an assault on the "separation of church and state." But, church/state dynamics are not a one-way street. Even if constitutional, direct government funding can threaten the integrity and effectiveness of faith-based organizations. The potential hazards are manifold: organizational dependency, loss of mission focus, watered-down programs stripped of essential religious content, burdensome regulations on hiring and credentialing of staff, a diminished autonomy in criticizing immoral government policies.

While the "Charitable Choice" provision of the 1996 welfare reform law sought to minimize the risks associated with private, faith-based organizations' acceptance of government money, many of these risks remain real nonetheless.

A superior approach to "rallying the armies of compassion" seeks to empower people so that they can contribute, in turn, to the strength of religious charities.

Nearly 70% of taxpayers—almost 85 million Americans—do not presently receive recognition for their charitable giving in the tax code. According to a recent report by PricewaterhouseCoopers for Independent Sector , extension of the charitable deduction to nonitemizers would increase giving levels by 11%—translating into an additional $14 billion dollars of additional giving each year—and stimulate almost 12 million new givers.

"This deduction would actually achieve three goals," testified Ken Gladish, national executive director of the YMCA of the USA, before the House Ways and Means Committee in late March. "It would reduce taxes, target tax cuts to lower and middle-income taxpayers who make up the majority of nonitemizers, and encourage charitable giving to community based nonprofits that are on the frontlines helping to strengthen America’s families."

Tax credits are another approach worthy of consideration.

A charitable tax credit would make it easier for people to give money to private charities. Donations to non-profit organizations would be counted against a donor’s tax liability (up to perhaps 15% of his total liability), thereby reducing the price of giving. By coupling self-interest to compassion, an added incentive would be created for philanthropy, generating an additional $145 billion every year for organizations that serve the poor, according to economists David Tuerck and Marianne Johnson of Suffolk University.

Increased funding for faith-based and community initiatives is necessary to reinvigorate civil society, but it is not sufficient. Mobilizing human resources—"rallying the armies of compassion," as President Bush likes to say—is essential to meeting human needs. It is important that in the years ahead as the federal government reduces its involvement in welfare policy, the number of volunteers actively serving charitable organizations increase.

While policy makers should lead by example, volunteering their own time and lending their own prestige to effective private charities (like those showcased in the Guide to Effective Compassion), there are two additional ways in which public policy reforms would enable people to more actively participate in the good work going on in their own communities.

Volunteer tax credits would recognize the de facto staff of private charitable organizations who provide essential service to the nation’s nonprofits. Businesses could afford to give time off to employees for volunteer work and to count lost wages against their own tax liability. Pro bono tax credits, on the other hand, would permit independently employed professionals, i.e., doctors, accountants, plumbers, etc., to lend their talents to charitable organizations during a regular day’s work and count the cost of services provided against their own tax liability. In either case, the tax credit would affirm the value of volunteering. It would reward companies (and employees) willing to live out their own commitments to the poor. It would give credit where credit is long overdue.

A properly crafted tax credit regime would also help to privatize ineffective, means-tested government programs. Since donations to organizations that work with the poor would count against a person’s tax liability, when charitable giving increased—whether that increase came in the form of more money or more time—government revenue would decline in an equal proportion. Particularly egregious government programs could be targeted for elimination or reduction by tailoring tax credits to cover organizations or activities that only address the same problems those programs were originally intended to solve. Thus the question is no longer one of whether our society should help the poor. The question is whether government or the private sector is best equipped to help the poor. Each taxpayer is left to make that decision on his own.

Strengthening civil society is the main ingredient to winning the War on Poverty. This means making changes in the tax code to reflect that priority. It also means challenging poor people—as well as challenging ourselves—to achieve more and to do more. True compassion demands nothing less of us.