Most studies show that a decrease in the price of giving causes giving to rise by more than tax revenues fall. And it receives additional volunteer assistance from the taxpayer, allowing it to channel more of its income directly to the poor. A tax credit of this kind would permit the taxpayer to deduct part or all of his contribution to a qualified charity from his tax liability, rather than, as with a deduction, from his taxable income. The compassion tax credit is in fact the next logical step toward welfare reform. Indeed, the existing and widely used tax deduction is itself a form of tax tampering, and not a very democratic one at that.
Some states already allow tax credits for contributions to charities that serve the poor.
There are a number of proposals before Congress to offer federal tax credits. These proposals represent a new kind of welfare devolution, one that strengthens those very community organizations to which the summit is a call to action. The compassion tax credit represents our drive to get not just onto the playing field, but over the goal line. David G. Tuerck is Executive Director of the Beacon Hill Institute at Suffolk University in Boston, where he also serves as Professor and Chairman of Economics. This article originally appeared in The Wall Street Journal , on Page A18 on April 28, 1997.