Tax Deductions and Science : The Frontal Cortex

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Jonah Lehrer is a contributing editor at Wired. He's also written for The New Yorker, Seed, Nature, the Boston Globe and is a contributor to Radio Lab. He's the author of Proust Was A Neuroscientist. His new book is How We Decide.

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Tax Deductions and Science

Category: Culture
Posted on: September 6, 2007 10:10 AM, by Jonah Lehrer

So tax breaks for philanthropy increase inequality:

For every three dollars they give away, the federal government typically gives up a dollar or more in tax revenue, because of the charitable tax deduction and by not collecting estate taxes. [snip]
The charitable deduction cost the government $40 billion in lost tax revenue last year, according to the Joint Committee on Taxation, more than the government spends altogether on managing public lands, protecting the environment and developing new energy sources.

I think it's pretty tough to defend tax deductions for cultural organizations. As much as I love the ballet, I'm not sure I want my tax dollars going to support a theater named after a rich person.

But one aspect of philanthropy that this article didn't touch upon was the deep reliance of modern American science on charitable donations, which almost always take the form of gifts to universities. It's the rare science building that isn't named after somebody. I think this reliance is especially clear when it comes to avant-garde science, be it stem cell research or computational neuroscience or artificial life. These are areas that the NIH isn't prepared to fully fund yet, and so the void is filled by people like Jim Stowers, or Jerry Swartz, or Eli Broad, or the Picower Foundation.

So I certainly can sympathize with people who want to reform our charitable tax-deduction laws. But such reforms shouldn't interfere with the advancement of science which, for better or worse, largely depends on the generosity of rich folks. I think this is especially true for controversial scientific topics and for science with little immediate application. (Big Pharm, for example, ain't gonna fund theoretical neuroscience.)

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Comments (4)

So let me read this right, for this $40B we in the US get $120 Billion dollars of investment in science, cultural and educational programs? Sounds like the best deal the government has ever done. Not considering the fact that if the tax break was removed a lot of the $40B would be sheltered in other ways. Talk about a strange way to spin numbers...

Posted by: Markk | September 6, 2007 10:56 AM

"So let me read this right, for this $40B we in the US get $120 Billion dollars of investment in science, cultural and educational programs?"

Well, and other sorts of programs.

Assuming that if there was no tax deduction there would be no such donations. Surely a bad assumption.

On the other hand if eliminating the tax deduction reduced charitable giving by precicely $40B it would be a wash. So in order to believe that the charitable tax deduction is a benefit, assuming that tax dollars and charity dollars are equivalently beneficial, you must believe that the charitable tax deduction is increasing charitable giving by more than 50%.

Its a bit more complex if you think charity is better or worse than government, but not much.

Posted by: jefff | September 6, 2007 5:55 PM

Science, cultural, educational, charity... you know ... Looking at that number I believe religious orgaizations are also probably in the $160B. In which case this is pretty meaningless, as they are probably the majority. Whether or not to tax churches is an interesting idea with plusses and minuses, even for the churches, but will never happen.

Posted by: Markk | September 6, 2007 9:03 PM

The beauty of philanthropy is that it is in the eye of the beholder. And that is the beauty of the tax deductions. The $40 billion that is in question here is currently given away BY the citizens of the US and not BY the US government. If the US Govt had an extra $40 billion to spend each year, where do you think it would go?

Posted by: amybuilds | September 7, 2007 1:25 PM