How to Subsidize a Haiti Donation

Charitable giving, as we’ve noted here, here, and elsewhere, is a tricky animal. Much of the giving that is considered pure altruism is in fact incentivized by a variety of factors. As we note in SuperFreakonomics, “U.S. citizens are easily the world’s leaders in per-capita charitable contributions, but the U.S. tax code is among the most generous in allowing deductions for those contributions.”

Consider the following example, an e-mail sent out by an accounting firm. The donation-by-text exception toward the end is particularly interesting:

2010 Haiti Donations Deductible In 2009

On January 22, President Obama signed into law a provision which allows Taxpayers who itemize deductions on their 2009 returns to claim a charitable contribution deduction for donations made after January 11th and before March 1st, for the relief of victims in areas affected by the recent earthquake in Haiti. This provision should promote timely giving to Haiti in the days ahead and weeks ahead when the region needs it the most.

Taxpayers contemplating making a contribution to help victims of the earthquake in Haiti should consider doing so before March 1, 2010 to take advantage of this special tax relief. Taxpayers can choose to deduct qualifying Haiti earthquake relief donations on either 2009 or 2010 returns, but the same item cannot be claimed on both years. The Taxpayer should choose to deduct the contribution in the year that produces the greatest tax savings.

To get the tax benefit, Taxpayers must itemize deductions on Schedule A. Those who claim a standard deduction, including short-form filers, are not eligible.

To qualify for acceleration, the contribution must be cash (not property), text message, check, credit or debit card and must be made specifically for the relief of victims in the areas affected by the January 12th earthquake in Haiti. Taxpayers must also make sure their contributions go to qualified charities. The Internal Revenue Service maintains a database on IRS.gov of most organizations that are eligible to receive tax-deductible donations. Contributions to foreign organizations generally are not deductible.

For donations made by text message, the IRS has eased the substantiation requirement. Taxpayers will meet their record keeping requirement by maintaining a telephone bill that shows the name of the donee organization, the date of the contribution, and the amount of the contribution.


Tonya

I think it's great idea. I don't know about altruism....but if given the right incentives, of course people will act in the manner intended.

Haiti needs money, a lot of Americans can spare a couple dollars. Giving a tax break on this year gives a more immediate incentive, and is just the push needed for many! And, those who have realized they need a few more deductions can take care of it this way - and get the "warm fuzzy" feeling (a nice side effect).

Joshua

It makes me wonder why we are so stingy when it comes to Haiti? $.50 to Canada's $3.90 on a per-capita basis if these numbers are correct.

http://manyeyes.alphaworks.ibm.com/manyeyes/visualizations/world-aid-to-haiti-aid-per-capita

Yian

to Joshua: Technically, the voluntary donation per-capital for Canada is more like $1.95. The Canadian government is matching the public donation up to $50mil.

Mark

@ Josh

Something about Haiti has really struck a chord with Canadians. I don't know if it's the fact that they are a Francophone country, the fact that our Governor General is of Haitian birth and managed to raise the profile of the country, but it's nice to see all the giving.

Mike

Joshua,

If you dig into the original data set, private donations are much larger than any government's pledge (which is what that chart represents). It's also unclear whether "in kind" donations like hospital ships, helicopters, air traffic controllers, etc., are included.

DonBrinn

About Canada and Haiti:
Before the earthquake, Canada has had a history of involvement with Haiti for several decades.

From Wikipedia: http://en.wikipedia.org/wiki/Canada%E2%80%93Haiti_relations

--- quote:
During the unsettled period from 1957 to 1990, Canada received many Haitian refugees, who now form a significant minority in Quebec. Canada participated in various international interventions in Haiti between 1994 and 2004.
...
From 1957 to 1986, the Duvalier family reigned as dictators. They created the private army and terrorist death squads known as Tonton Macoutes. Many Haitians fled to exile in the United States and Canada, especially French-speaking Quebec. In the 1991 Canadian census, nearly 44,000 people described themselves as being of Haitian origin. By 2006, Canada had over 100,000 residents of Haitian origin.
...
There has been controversy about Canada's involvement in the international intervention in 2004, with several commentators stating that Canada was complicit in the overthrow of a democratically elected government.
...
In 2006 Canada assisted in international efforts to help Haiti complete its first full electoral cycle since its constitution entered into force in 1987. The Government of Canada through the Canadian International Development Agency contributed nearly $40 million for the electoral process, providing observers and technical assistance. The Governor General of Canada, Michaëlle Jean (herself of Haitian origin) attended the inauguration of President René Préval on May 14, 2006, as the Canadian representative.

In July 2007, Canadian Prime Minister Stephen Harper visited Haiti, including a visit to a Canadian-funded hospital in the crime-ridden Cite Soleil slum.
...
As of 2009, Haiti is the second largest recipient of Canadian aid after Afghanistan. As of 2008, Canada had committed $555 million to Haiti over five years. In February 2009, the Canadian government announced it will focus foreign aid on 20 countries or regions where it hopes to have a bigger impact, including Haiti.
:endquote---

So to me (a Canadian) it is no surprised that Canada is the per-capita leader in aid and reconstruction in Haiti, since this is more of a longstanding connection than just the recent earthquake. The long-term reasons likely include the francophone connection as a big part.

Read more...

Bananen

I'm not so sure that "the U.S. tax code is among the most generous in allowing deductions for those contributions".
The income taxes in the US are much lower than most other Western countries, which means that the actual amount returned is much lower as well.
An American who pays 30% income taxes will get back $300 on a $1000 contribution, but for example a Swedish citizen who pays 50 % will get $500 from his $1000 contribution. Who do you think has the largest economic incentive to contribute?

Bobby G

On the topic of cell phone donations:

It's sad (although not exactly impractical) that cell phone companies are refusing to donate the $10 per text saying Haiti to whatever 5 digit number (as seen in commercials for the NFL Playoffs, for example) until the cellular subscriber actually pays the bill (average of 15 days, sometimes up to 60)

Obviously from an accounting standpoint this makes a lot of sense... if there are going to be millions of dollars moving around here, the cell phone company doesn't want to be on the hook for that money if people are texting that without realizing the context of the full deal, or whatever. The unfortunate side is that the people in Haiti (who surely would prefer support NOW and not in a month) won't get that money until possibly after they really really need it.

While I do not blame anyone for the way this system works, it's sad that it's the "preferred" method to advertise for a charity due to it being so convenient for the potential donor. It is also a little gross how inevitably soon we will begin to hear reports of all the millions of dollars that organizations supporting this method of donation have "raised" for the people in Haiti and how they and the American people deserve a big pat on the back. It will be an admirable number, surely, but I'm sure most of Haiti would have preferred half of it instantly instead of all of it a month later.

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Jordan Pine

I think most responders to this post are missing the point. It is reprehensible that the people in Wasington are abusing their power to create incentives that direct charitable donations to a particular cause. I also note they are directing funds only to an approved list of charities. By now, the negative consequences of corporations getting in bed with government to gain advantage (what John Stossel has dubbed "crony capitalism") are widely understood. But has anyone considered the negative consequences of government-approved charitable giving (crony charities? crony donating?) Especially in light of Pres. Obama's previous crackdown on charitable giving deductions (Obama giveth and he taketh away)?

Matt

Jordan Pine's comment is half right, half paranoid.
The "right" part has to do with the fact that Congress is creating incentives to give to certain favored causes. It's entirely plausible that the impact of the Haiti tax break is not to increase the total amount of charitable giving at all, but to shift it away from other potential recipients to Haiti relief.
The "paranoid" part has to do with the notion of "crony charities." If you look at recent history, Congress does this every time something bad happens. Before Haiti it was the typhoon in 2004, Katrina in '05. One unanticipated thing that happened with the typhoon is that some distinctly unworthy "charities' benefited from this. From this perspective, it seems like creating an "approved list of charities" is precisely the right thing to do. This isn't cronyism-- it's the best way to administer a not-so-great tax idea.

Nelly O'Neille

Keep Haiti in your hearts on Valentines Day! Instead of a traditional card, I've posted a photo of my better half on the Haiti: Wall against Hunger - at http://wall.wfp.org

Joel

Also, here is an infographic depicting donations to Haiti by country adjusted to show donations as a percentage of GDP: http://www.creditcardchaser.com/haiti-donations-by-country/

Amit

@Josh
I found an infographic discussing what Avatar has to do with Haiti. Many people have seen Avatar, and the infographic puts the donations of various countries into the context of how many minutes of footage it would fund for the film.

http://www.fastcompany.com/blog/cliff-kuang/design-innovation/what-does-avatar-have-do-haiti