Charity is Good – Or Is It?

Charity is Good – Or Is It?

Politicians love the concept of the sound bite.   They are short, pithy, digestible, and easy to grasp and accept at face value.  Non-thoughtful people are stirred by sound bites and often moved to action (vote) because of the attractiveness and brevity of what is said.  When a politician seeks to go into further depth, s/he is accused of being elitist and unduly professorial.  So, in this concentration-challenged and Twitter-obsessed society, we end up with a watered-down and vitriolic political discourse that consists of “5 point plans” that say nothing and culminate in the level of dysfunction we currently see in Washington.  It’s a pretty pathetic situation.
 
So, indulge me while I craft my own sound bite:  “Charity is good.”[1]  Who can argue that?  But at the risk of sounding elitist and professorial, I’m going to take that sound bite and dissect it.  First of all, define “charity”.  According to the website dictionary.com, charity includes “(1) generous actions or donations to aid the poor, ill, or helpless or; (2) something given to a person or persons in need; alms.”  It is a pretty broad definition.  The Internal Revenue Code defines charity in a more legalistic yet similarly broad manner.  The basic 501(c)(3) organization, or charity, is one that is “organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary or educational purposes, or to foster national or international sports competition…or for the prevention of cruelty to children or animals……”
 
So, even though we have extensive regulations to flesh out the IRC and rulings galore to further interpret it, we are still left with definitional loopholes broad enough to drive a truck through – and charities that conceivably stretch the definition to the breaking point.  In a recent article, the online magazine Slate.com cited the Renegade Roller Girls of Oregon (Bend, OR) as an example of a “questionable” charity.  I’m not so sure about this and frankly, I think it deserves a bit more investigation.  (While I did find it in the IRS’ charitable organization search engine listed as a public charity, I was unable to locate it in the charitable database www.guidestar.org.)  Certainly, on its face, the Renegade Rollers sounds like an organization that “fosters national sports competition” so what could be bad?  One person’s philanthropic passion is another’s “what, are you kidding me?” example of bad public policy.  But the Renegade Roller Girls are small potatoes.  In that same article, the author goes on to cite a 2006 study by the Congressional Budget Office (CBO) that compared for-profit hospitals and charitable hospitals and found only small differences between them, leading one to question the need for any sort of tax exemption for hospitals at all, particularly since charitable hospitals represent only 1% of all US charities but garner a whopping 43% of all donations.  On the other hand, they do provide more than two thirds of the Medicare beds across the country, so weigh the public good against the tax cost.  Then there is the perennial argument about private schools and colleges – while they are indeed organized for “literary or educational purposes” do they go about it at the cost of draining resources from the public education sector where greater numbers of students are served?  And even if they do, is that a reason to strip their charitable status from them?  Doesn’t the fact that major scientific breakthroughs have come from some of these schools make an argument for keeping that tax exemptions?
 
My point is simple yet highly complex – yes, charity is good, but try defining charity first and you realize that the argument stretches far beyond the sound bite.  I have long maintained that the “marketplace of philanthropic impulses” will direct capital to the pet causes of the contributors and that this is not necessarily a bad thing.  But like all marketplaces it can be prone to excess and needs a certain amount of regulation to keep it honest and working for the public good.  As the tax debate in Washington continues to weigh the possibility of limiting itemized deductions to 28% (including the charitable deduction), perhaps a secondary debate should occur about a more realistic definition of “charity” for purposes of that deduction.