{"id":1535713,"date":"2025-05-13T01:45:00","date_gmt":"2025-05-13T05:45:00","guid":{"rendered":"https:\/\/bugaluu.com\/news\/?p=1535713"},"modified":"2025-05-13T01:45:00","modified_gmt":"2025-05-13T05:45:00","slug":"what-scrooge-effect-americans-keep-giving-despite-the-welfare-state","status":"publish","type":"post","link":"https:\/\/bugaluu.com\/news\/what-scrooge-effect-americans-keep-giving-despite-the-welfare-state\/1535713\/","title":{"rendered":"What Scrooge Effect? Americans Keep Giving, Despite The Welfare State"},"content":{"rendered":"

What Scrooge Effect? Americans Keep Giving, Despite The Welfare State<\/span><\/p>\n

\n

Authored by Paul Mueller via the American Institute for Economic Research<\/a> (AIER)<\/em><\/p>\n

We just made it through another tax season. Congress has begun debating whether and how to\u00a0extend<\/a>\u00a0the Trump\u00a0tax cuts<\/a>\u00a0from the 2018 Tax Cuts and Jobs Act. While many elements of that tax debate are worth commenting on, I want to highlight the standard deduction because it sheds light on an underappreciated part of American philanthropy.<\/p>\n

<\/a><\/p>\n

Prior to the introduction of the federal income tax in 1913, charitable donations did not have meaningful tax deduction benefits. Yet Americans gave generously. In fact, if anything, American philanthropy has declined because of the Scrooge effect<\/a> of the welfare state.<\/p>\n

\u201cAre there no [state-funded] prisons [or work-houses]?\u201d<\/strong><\/em> Ebenezer Scrooge asks in Charles Dickens\u2019s \u201cA Christmas Carol.\u201d<\/p>\n

The questions reveal that Scrooge (and others) feel that their higher taxes to fund a variety of social and \u201cpoverty-reduction\u201d programs take the place of direct philanthropic giving.<\/p>\n

Americans also keep a lot less of what they earn today than they did 100 or 150 years ago\u2014as most of us know from recent personal experience.<\/strong><\/p>\n

The case of welfare programs crowding out charity has been made eloquently by Marvin Olasky in \u201cThe Tragedy of American Compassion<\/a>.\u201d Various religious and fraternal orders provided health insurance, old-age insurance, and other social services to their members throughout the 19th and into the 20th century. These services were later replaced by state unemployment benefit schemes, Social Security, Medicare, and Medicaid.<\/p>\n

These government programs \u201ccrowded out\u201d charitable, philanthropic civil society\u2014contributing to problems of declining social capital <\/strong>elaborated by Robert Nisbet (\u201cQuest for Community\u201d) and Robert Putnam (\u201cBowling Alone\u201d). Government agencies and government checks replaced civic networks and systems of support. Yet American philanthropy is still alive and kicking in the United States.<\/p>\n

The Lilly Family School of Philanthropy at Indiana University\u00a0estimated<\/a> that Americans gave $557.16 billion to charity in 2023. That\u2019s about $1,600 per capita. By comparison, Canadians gave about $400 per capita to charity and Brits gave about $250 per capita. Even as a percentage of gross domestic product, the United States ranks well above European countries. According to one source<\/a>, the United States is one of the most charitable countries in the world.<\/p>\n

What\u2019s remarkable is that the vast majority of Americans who give to charity receive no federal tax benefit from doing so.<\/strong> Returning to the individual exemption, when you file your taxes, you can either claim the standard deduction ($14,600 for an individual, or $29,200 for a couple) or you can itemize your deductions. A few expenses can count toward the itemized deductions, but these expenses are highly qualified and don\u2019t add up to much for the average person.<\/p>\n

From a benefit standpoint, your qualified expenses, including your charitable giving, must add up to more than the standard deduction before you receive any tax advantage. Suppose someone takes the entire $10,000 state and local tax deduction (SALT) and comes up with $5,000 more in other qualified expenses. They would still be $14,200 short of the $29,200 standard deduction for a couple. This means that any of their charitable giving, up to $14,200, does not render them any benefits on their federal taxes.<\/p>\n

Seventy percent of American households earn less than\u00a0$127,000<\/a>\u00a0before taxes. So $14,200 would mean donating more than 10 percent of their pre-tax earnings before they saw any advantage from the giving being \u201ctax-deductible.\u201d For most Americans, the \u201ctax-deductible\u201d element of charitable giving is practically irrelevant. Yet they give anyway.<\/p>\n

Most Americans donate money even though they receive no federal tax benefit.<\/strong> Americans gave generously long before the income tax and the charitable tax deduction existed. A large industry of lawyers and accountants has cropped up to help wealthy people lower their tax liabilities through various forms of charitable giving.<\/strong> Sometimes these methods lead to creative accounting and legal gymnastics that can distort or divert people\u2019s choices of how to use their wealth.<\/p>\n

These observations provide a few reasons to want an alternative to our federal tax code 501(c)(3) structure. We should ask whether society would be freer in a world without tax exemptions for charitable giving\u2014a world without the stark for-profit\/nonprofit legal divide with all its attendant reporting and hoops. Tax code rules that put their thumb on the scale represent social engineering of the kind free people should reject.<\/p>\n

Most Americans give generously without thought of return\u2014even with a large welfare state and high taxes.\u00a0<\/strong><\/p>\n

There is something deeply admirable about this kind of generosity that gives without expecting any material benefit in return. Imagine how they would give if the welfare state were trimmed down and their taxes were lower.\u00a0<\/p>\n

That\u2019s what George W. Bush\u2019s \u201ccompassionate conservatism\u201d should have meant.<\/strong><\/p>\n

Views expressed in this article are opinions of the author and do not necessarily reflect the views of ZeroHedge.<\/em><\/p>\n<\/div>\n

Tyler Durden<\/a><\/span>
\nMon, 05\/12\/2025 – 21:45<\/span><\/p>\n

\u200bhttps:\/\/www.zerohedge.com\/personal-finance\/what-scrooge-effect-americans-keep-giving-despite-welfare-state<\/a>\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"

What Scrooge Effect? Americans Keep Giving, Despite The Welfare State Authored by Paul Mueller via the American Institute for Economic Research (AIER) We just made…<\/p>\n","protected":false},"author":0,"featured_media":1535714,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1535713","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","wpcat-1-id"],"_links":{"self":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1535713","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/comments?post=1535713"}],"version-history":[{"count":0,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1535713\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/media\/1535714"}],"wp:attachment":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/media?parent=1535713"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/categories?post=1535713"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/tags?post=1535713"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}