I think the main differences are that it’s more costly to the donor to donate to a tax-deductible charity than to earmark their domations. (40% of cost rather than ~5%), and the replaceability issue that makes it unclear whether or not earmarked taxes do any good at all.
Thanks, Ryan. I’ll take the opportunity to develop my thoughts.
Let me focus on Sweden since that’s the country I know best and give you a bit of context. The previous right-wing government made charitable giving tax-deductible a few years ago, but the new Social Democratic government is now about to suspend this law.
One important argument against tax-deductions to charity is that charities can be very ineffective and/or work on unimportant causes. As I point out in the OP, this system effectively takes care of that counter-argument, since you could only ear-mark could only ear-mark your taxes for something that the government has already deemed spending-worthy.
Indeed, you could see this scheme as a generalization of tax-deductions to charity. When a donor is giving to a tax-deductible charity, the government’s share of the total cost is, as you say (I think) equal to the donor’s marginal tax rate (which is above 50 % in Sweden for high-income donors). Under this system, government’s share of the total cost could be any proportion of the total cost. Typically, it would be higher, though (i.e. the donor’s share of the total cost would be lower).
Also, in Sweden, the government is funding various charitable organizations directly, such as the Red Cross. Thus, in principle you could ear-mark taxes to the Red Cross via this scheme. (You could also lobby the government to start funding other charities, of course.) The difference is that this scheme would give you more leverage than standard tax-deductions would (since the donor’s share of the total cost would be lower).
I’ve said that under this system, you could only ear-mark your taxes to forms of spending the government is already making. That’s not the only possible criterion, but I think it’s a natural one.
That criterion is obviously much stricter than the criteria that apply to charity tax-deductions in most countries. This is related to the fact that under this system, the government’s share of the total cost typically is higher. Not only is the government refraining from taxing the money you decide to give to a particular charity or policy area—it also tops up this money with other tax-payers’ money. This means that it could legitimately claim to have more of a say where this money is going to. It could enforce stricter criteria.
Ah, missed it.
I think the main differences are that it’s more costly to the donor to donate to a tax-deductible charity than to earmark their domations. (40% of cost rather than ~5%), and the replaceability issue that makes it unclear whether or not earmarked taxes do any good at all.
Thanks, Ryan. I’ll take the opportunity to develop my thoughts.
Let me focus on Sweden since that’s the country I know best and give you a bit of context. The previous right-wing government made charitable giving tax-deductible a few years ago, but the new Social Democratic government is now about to suspend this law.
One important argument against tax-deductions to charity is that charities can be very ineffective and/or work on unimportant causes. As I point out in the OP, this system effectively takes care of that counter-argument, since you could only ear-mark could only ear-mark your taxes for something that the government has already deemed spending-worthy.
Indeed, you could see this scheme as a generalization of tax-deductions to charity. When a donor is giving to a tax-deductible charity, the government’s share of the total cost is, as you say (I think) equal to the donor’s marginal tax rate (which is above 50 % in Sweden for high-income donors). Under this system, government’s share of the total cost could be any proportion of the total cost. Typically, it would be higher, though (i.e. the donor’s share of the total cost would be lower).
Also, in Sweden, the government is funding various charitable organizations directly, such as the Red Cross. Thus, in principle you could ear-mark taxes to the Red Cross via this scheme. (You could also lobby the government to start funding other charities, of course.) The difference is that this scheme would give you more leverage than standard tax-deductions would (since the donor’s share of the total cost would be lower).
I’ve said that under this system, you could only ear-mark your taxes to forms of spending the government is already making. That’s not the only possible criterion, but I think it’s a natural one.
That criterion is obviously much stricter than the criteria that apply to charity tax-deductions in most countries. This is related to the fact that under this system, the government’s share of the total cost typically is higher. Not only is the government refraining from taxing the money you decide to give to a particular charity or policy area—it also tops up this money with other tax-payers’ money. This means that it could legitimately claim to have more of a say where this money is going to. It could enforce stricter criteria.