Cultural Pluralism & Charitable Deduction Reform

• In Event: Federal Tax-Exemption and Charity

Abstract

The charitable gift deduction has come under renewed scrutiny in tax policy debates. In recent years, scholars have begun to question whether Section 170’s current construction—which limits its availability primarily to high-income itemizers and allows individuals to deduct gifts made to any qualifying charity, regardless of mission, need, or public benefit—is normatively desirable. Scholarly debate has illustrated how the deduction effectively subsidizes and reinforces the policy preferences of the wealthy, reflecting and entrenching broader patterns of wealth inequality. And yet, little attention has been paid to how these attributes of the charitable deduction impact the United States’ cultural sector, where donor discretion and classed patterns of taste have contributed to stark disparities in institutional wealth.

This paper argues that charitable resources in the cultural sector are inequitably distributed, and that Congress should reform the charitable deduction to promote greater cultural pluralism. Drawing on political theory, statutory analysis, and empirical studies, both original and secondary, it shows how current tax law channels philanthropic capital toward a narrow class of well-endowed, highbrow cultural institutions. It then proposes three policy reforms, each of which would modify the deduction available under Section 170 based on institutional characteristics: one modifies the deduction based on endowment size, another based on NTEE decile code group, and a third incentivizes giving to pooled cultural trusts. In doing so, the paper demonstrates how minimizing donor discretion—an increasingly prominent scholarly idea—can be operationalized through administrable changes to the Code.

Author

• Skyler Dykes, WilmerHale