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Posted by on Feb 27, 2017 in At TMV | 0 comments

No Tax Deduction for Donations that go Outside the US

The United States provides a tax deduction for qualified charitable giving. A decent percentage of this money, well into the tens of billions, is sent outside the country. I am certain these are very good causes, but my question is:

Should the United States government subsidize monies spent to help out non-US residents when there is so much need here?

I propose that the US change its tax code so that qualified charitable giving must be made to entities who commit to focusing all of their efforts within the United States. Entities, like the Red Cross and the United Way, that do both, would have to create a separate group for their international funding efforts. It does not mean that people who care deeply about the starving people in east Africa should not support entities that help in those areas. It just means their donations to that entity will not come with a corresponding US federal tax deduction.

Americans donated over $370 billion dollars to charities in 2015. That is up from just under $360 billion in 2014. Both were all-time records in inflation adjusted dollars, according to Charity Navigator. Perhaps someone is a better researcher than I, but I could not find a clear statistic that indicates how much of this money is sent outside of the United States. From anecdotal evidence, based on the largest charities and where they say they spend their money, the percentage is significant.

If the amount of money donated that leaves the US is about 25% of the total, that is over $90 billion dollars. Assuming those who give this money pay one-third of their income in taxes, that is over $30 billion dollars that the US is paying toward helping non-US residents, while US residents are struggling.

Consider the number of jobs that will be created and the number of people who are struggling in this country who will be helped if nearly all of the $370 billion donated to charities in this country stayed here to help US residents? $90 billion dollars could create 2.25 million new $40,000/year jobs in the US. Of course, some jobs exist in the US now to administer that money, but no matter how you slice it, an infusion of $90 billion would significantly help those benefited by charities in the US economy.

We can assume that giving will continue to increase, so the government will not reduce its deficit by the $30 billion, but it will be using that money to subsidize benefits to US residents, which creates a multiplied benefit to the US economy as they buy goods and services, pay for housing and move off of federal benefits.

President Trump told the world, and those living in difficult conditions, that he would change the way we took care of them. He promised to focus on building and protecting the US first. Significantly increasing the amount of charitable money that stays in the United States could go a long way toward rectifying the plight of many in the US. Both the Democrats and Republicans should support this move.

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