The procedural presidency of George Bush

He is author of Searching for Safety; Risk and Culture; Budgeting; Speaking Truth to Power; The Beleaguered Presidency;and coauthor of Presidential Elections.     

A tax by any other name: The donor directed automatic percentage contribution bonus,a budget alternative for financing governmental support of charity

Our paper analyzes the merits of four alternatives for providing governmental support to charity—the existing tax write-off, a tax credit, a sliding matching grant, and a percentage contribution bonus. After searching for an appropriate budget mechanism (a five-year fixed-sum authorization and appropriation), we apply a wide-ranging set of criteria—equity, legitimacy, efficiency, reciprocity, controllability, etc.—to each of the four alternatives. In brief, the existing tax write-off is grossly inequitable among donors, poorly controlled by government, and is part of a tax system increasingly viewed as illegitimate by citizens. The advantages of the write-off are that it produces predictable amounts of income at low administrative cost without overtly raising questions of constitutionality. Its disadvantages would be mitigated by a tax credit in proportion to the amounts contributed by taxpayers. But the credit does not reach people who do not file returns and may significantly decrease income to charitable agencies. The sliding matching grant (under which the government pays to charity in proportion as the individual gives of his income) provides a particular form of equity for taxpayers but is deficient in other respects. The contribution bonus—a percentage of each dollar contributed paid to charity by government—is wholly equitable, includes all givers, sustains reciprocity with recipients, is controllable by government, and is legitimate in treating expenditures as expenditures and not as tax dodges. It also raises the possibility of increasing the government's contribution. The defects of the bonus are higher administrative costs and potential doubt about constitutionality. We conclude in favor of a percentage contribution bonus set high enough to provide marginally more income for charity and reduce financial uncertainties during the transition. Appraisal of political feasibility suggests that supporters of charity are likely to be worse off unless they come up with a more defensible approach, such as the contribution bonus. To help resolve doubts, we suggest adding on a small percentage contribution bonus to the present tax write-off for three years so as to test constitutionality and assess more precisely administrative costs. While there is no one proposal that will make everyone better off, the contribution bonus is far superior on most criteria to the alternatives.The paper was written for The Commission on Private Philanthropy and Public Needs. For their criticisms and constructive comments, including those with which we disagreed, we express our appreciation to Professors John McNulty and Lawrence Stone, Law School, and Professors Arnold Meltsner and William Niskanen, Graduate School of Public Policy, all of the University of California (Berkeley).