Charitable Giving Deductions

In 2013, US citizens gave an estimated $335.17 billion dollars representing around 2% of GDP. This was encouraged partly by tax incentives, which offer deductions for charitable giving. The Treasury estimated these incentives cost the government $50 billion a year. These laws are common and are implemented in many developed countries. The question should be asked though: why? There is doubtless a study that has calculated the marginal impact of increasing deductions based on the size of donations but it would be hard for me to believe that $1 larger deduction caused $1 or more to be donated than otherwise would have. More importantly perhaps is that charitable giving is any giving to a non-profit organization. The bar for obtaining non-profit status in the US is impressively and deals mainly with the structure of the organization rather than its cause or effectiveness (the main restriction is that it can’t be political.) Why then should the government continue to give these tax breaks? To understand more thoroughly we should likely think of the alternative without the deductions.

If we are to assume that without the tax breaks, government spending would be the same, then there are two key outcomes: (1) the government has X more money (2) Y less money is given to non profits. It seems then that this policy would make sense in two separate circumstances: either Y>X (which I have argued as unlikely above) or the impact of Y is greater than the impact of X. This would suggest that the rich are far more efficient at giving than the government. Neither of these seems likely and so I am confused by the motivation. We can maybe agree that philanthropy is important but it seems that if the government wants to encourage that, it would be best for them to undertake more philanthropic projects or allocate that money to not for profits themselves. The tax breaks make little sense and encourage philanthropy at a large cost. In some way they also divert attention by magnifying the impact of the richest while not acknowledging the help that the rest of the American public has given them in allowing the donations. As I’ve stated, eliminating the deductions would remove funding from some not for profits, so the government would have to step up and prop up NGOs with extra giving for a period, but they would still likely have excess savings. In sum, charitable giving is good, but the government should do it itself or not at all.

-Mac

 
Source: http://www.economist.com/node/21556570

Internet Sales Tax Facing Republican Opposition - Jason Chiu

Jason Chiu

There Won't Be an Internet Sales Tax Anytime Soon

            Supporters of the bill which would end online tax-free online shopping has faced staunch and significant opposition from Republicans in Congress. House Speaker John Boehner of Ohio said that he would block the bill, which would allow states to collect a sales tax from online retailers. Known as the Marketplace Fairness Act (MFA), the bill was passed by the Senate with strong bipartisan support more than a year ago. House Republicans have never supported the bill, however. Their opposition stems from the worry that voters could view the online tax as an indirect tax increase. As expected, small online retailers have recognized Boehner’s effort as the online tax poses a threat to smaller online retailers.

Boehner has made it very clear that he will oppose the bill no matter what. Supporters of the tax measure still are not giving up hope. Led by Majority Whip Richard Durbin of Illinois, supporters of the tax measure are keeping all options open including combining two measures.

While Boehner has staunchly opposed the measure, two Republican representatives have expressed their support. Mike Enzi of Wyoming and Lamar Alexander of Tennessee hope that the bill will still pass before the year’s end. Republicans who support the measure and Democrats have attempted to tie the MFA to a similar sounding but separate bill that implements a longstanding ban on taxing Internet access. This is something that both sides agree upon but many expect that Boehner and the House Republicans will not budge on the issue.

Sources:

http://online.wsj.com/articles/internet-sales-tax-faces-republican-opposition-1415739069

http://time.com/3580835/internet-sales-tax/

Medicare to Pay for Lung Screenings for Smokers - Joshua Cohen

Medicare to Pay for Lung Screenings for Smokers

According to today’s New York Times, Medicare has agreed to pay for long-time smokers to receive Lung Cancer screenings. The policy will cover individuals aged 55-74 who have smoked a pack a day for 30 years or longer. Based on the proposal, Medicare will cover annual screenings for around four million people. A panel of government health experts claims that the change in policy can potentially save 20,000 American lives a year. While these individuals receiving the screenings pay nothing due to the nature of the Affordable Care Act, the cost of each one of these screenings is an estimated $241. Policymakers spent months debating the cost versus benefit of adopting this policy. While it can lead to benefit for a very large portion of the population, it does take money out of taxpayer’s pockets to help individuals who have put themselves at risk due to their habits.

            Although I agree with the policy, and believe that the social benefit of saving thousands of lives outweighs the cost of administering the procedures, the amount of money that will be put towards the cause is large. A study published last May projected that paying for these screenings would cost Medicare $9 billion over five years, or around $3 per month per beneficiary. While that is not a staggering number relative to government expenses, it makes sense that some people are outraged over the policy. Some individuals do not agree that individuals who have smoked excessively for years deserve to reap the benefits of treatments that specifically target the habit. Their view on the subject is that if an individual smokes a significant amount, he or she should be held accountable for doing so and that the taxpayers’ money should not be used to assist him or her.

All said in done, it still could never be as bad of a decision as the $654 million baseball field built in Miami!

Sources:

http://www.nbcnews.com/health/health-news/medicare-plans-pay-lung-cancer-screening-n245511

http://www.nytimes.com/2014/11/11/us/medicare-proposes-paying-for-lung-cancer-screenings-for-older-longtime-smokers.html?ref=politics&_r=0

Supply and Demand Changes in the Prostitution Industry as a Result of the Internet – Brian Bernstein

            This August the Economist released an article addressing the ways in which technology has shaken up the world’s oldest business: the occupation of prostitution.  While we tend to consider this practice part of the underground market, there has been a recent study performed on the economic factors that have been influenced by the newly widespread use of the internet, along with other technologies, to circumvent the classical pimp-centered model.  Numerous websites and apps around the world now specialize in allowing for information to flow easily between the buyer of sex  (the John) and the seller (the prostitute).   This ease of information not only makes it easier for the John’s, but also makes it simpler for prostitutes to work more safely, through the social networking aspects of these websites.  Prostitutes are able to communicate with each other about any client’ violent behavior, and frequently participate in background and health checks. 

            While prostitution is still illegal in all states except for Nevada, the prostitution market online is still very large, with many websites advertising themselves as fictional.  For this reason, it was possible to use a recent survey to analyze the trends in the supply and demand of prostitutes over the past decade, and the resulting price changes for the offered services.  Over the past 8 years, the average price per hour for a female prostitute dropped from just under $350 per hour to just over $250 per hour.  While this change can be partially explained by the Great Recession’s decreased consumer ability to purchase luxury goods as well as the increased supply of women looking for other means of income, I agree with the article in that the bigger factor is the advent of these new technologies.  The ease of advertising oneself online has boosted the supply of workers by drawing more locals into the sex trade, while broader social change may have a factor in a reduction in demand, with speedy hook-ups (through applications like Tinder), making sex much more easy than it has been historically.  The last major factor influencing this significant drop in hourly rates is the move from the pimp-based system to one with much lower costs, as the prostitute is able to keep a much larger (if not 100%) share of her earnings, through the enabling of self-advertising.

            While the sex trade is still obviously one that is very controversial and damaging, the far-reaching impacts of technological advancements clearly have had a significant impact on one of the shadiest industries that we know.  I strongly encourage reading the entirety of this article to anybody who would like to know more about the sleaziest of economic topics.

Sources:

http://www.economist.com/news/briefing/21611074-how-new-technology-shaking-up-oldest-business-more-bang-your-buck