March 26, 2009 | Read Time: 1 minute
Should donors be able to claim a deduction for contributions they make to charities located outside the United States?
Two prominent University of Chicago professors are debating that question on their blog.
Gary Becker, a professor of economics and sociology, says he favors at least some deduction for giving to foreign organizations that do not have U.S. offices or tax-exempt status.
“Otherwise, it may just be another form of protectionism, where American services and goods are favored over foreign services and goods,” he writes. “Since protectionism arguments take many guises, it is likely that some of the opposition to allowing tax deductions for foreign charities is due to the desire to impose tax disadvantages on the ‘import’ by American individuals and organizations of foreign ‘goods.”
Richard Posner, a law professor, disagrees. “Although charitable donations to foreign recipients will thus diminish if the tax deduction is repealed, there is likely to be some substitution in favor of domestic recipients, which will increase welfare in the United States; and that seems to me a good thing, especially in a depression,” he writes.
“Also, to the extent that total charitable donations fall, tax revenues will rise, which is also a good thing, given the enormous budget deficits that we face,” Mr. Posner continues.
“I suspect, moreover, that charitable donations to Americans create more utility than charitable donations to people in poor countries, because the latter donations reduce pressures for desperately needed political, economic, and social reforms,” he adds, citing the example of Robert Mugabe, Zimbabwe’s leader.
What do you think?
