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Monkeying Around with Charitable Deductions

1 min readBy: William Ahern

There’s no income tax deductionA tax deduction is a provision that reduces taxable income. A standard deduction is a single deduction at a fixed amount. Itemized deductions are popular among higher-income taxpayers who often have significant deductible expenses, such as state and local taxes paid, mortgage interest, and charitable contributions. as popular as the one for gifts to charity, but like every deduction, many people abuse it. Here’s an excerpt from this morning’s Washington Post article about taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. -exempt groups selling naming rights.

In March 2005, the Golden Palace Casino — an online gambling operation — paid $650,000 for the rights [to a rare, unnamed monkey] and named the primate Callicebus aureipalatii. (Aureipalatii means “golden palace” in Latin; the casino was not allowed to add “.com” because that could not be Latinized.) Today, the casino has a Web site dedicated to its official mascot, where customers can not only listen to the primate’s cry but also purchase T-shirts, tracksuits and even thongs.

So this “charitable gift” is really an advertising expense, just like buying the naming rights to a football stadium.

Whenever Congress and the IRS permit a taxpayer to deduct a gift, they are effectively making a contribution to that donor on behalf of all American taxpayers. And when an individual or corporate donor not only “gets something” for its gift but starts making money directly from it, the writers of tax law should pause and reconsider how the charitable deduction is working.

Here’s a primer on the charitable deduction from an economic perspective, and here and here we have written about the alarming trend of large-scale commercial enterprises to operate as tax-exempt entities in competition with regular taxpaying firms that provide the same goods and services.