ARTICLE :: The charitable deduction allows taxpayers to deduct amounts donated to organizations pursuing statutorily designated purposes from their otherwise taxable income. By lowering the after-tax cost of giving and encouraging taxpayers to donate more than they otherwise would, the charitable deduction subsidizes a broad variety of organizations. Some of these organizations provide widespread societal benefits, while others provide narrower benefits that remain closer to the taxpayer-donor’s home. To evaluate these current laws, this Article focuses on efficiency criteria, which limit subsidized organizations to those with donor support that does not cover the costs needed to optimally provide goods and services. Existing scholarship has identified the conditions that cause these underfunding issues but has not sought to apply these concepts to determine whether the organizations subsidized through the charitable deduction are actually in economic need. This Article seeks to fill this gap. While one cannot precisely determine whether and to what extent any given organization or type of organization is underfunded, the general assessment of this Article provides a starting point for evaluating the scope of the deduction. This Article suggests that some organizations currently subsidized through the charitable deduction may be able to garner sufficient donations on their own and that the tax law may provide subsidies that are economically unnecessary.
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