Singapore’s Charitable Tax Credit
Tyler Cowen informs us that Singapore has a unique approach to encouraging charitable giving. For each $1 the taxpayer gives to a qualified charity, the government reduces the taxes owed by $2.50. Although Tyler calls this a super charged deduction, it’s actually a credit and it’s similar to a proposal we have been making for quite some time. In our proposal:
- There would be a one-for-one tax credit, limited by each taxpayer’s share of funding for federal welfare programs.
- For each $1 given, the government would be required to reduce its anti-poverty budget by $1.
- Gifts could only go to charitable activities that help the indigent (gifts to churches, symphonies and art museums don’t count).
With full participation, taxpayers rather than politicians would decide where the welfare dollars go. We call this proposal “Taxpayer Choice.” See a brief description here and a longer explanation (study, book) I wrote with Michael Stroup, in which we include 21 questions and answers about the concept’s practicality.
I think it’s a great idea. Encouraging charitable giving is very important to the safety net structure of our society. The less we rely on Govt, the more we encourage improvement.
How do we encourage improvement by not relying on the government?
Sorry, I didn’t really explain.
I was referring to the perverse incentives the Govt provides through many of its social programs. Its a circle of poverty.
Tax incentives for people to donate their money in areas they find fitting, is something I would like see more often
This is a great idea. It’s a “shared value” concept. Incentivizing people to donate to charity and also, opening up the Federal budget.
It would save our country billions
Does anyone know of any studies conducted on these “super charged deductions”? Seems like a great way to stimulate activity in a area that needs the funding/donations.
May try here
http://www.kiplinger.com/article/insurance/T027-C000-S002-health-savings-accounts.html
Thanks, Lucas! Very interesting article
I would be more than happy to contribute to an indigent “Health Care Fund” if the Govt would stay out of health care.
I like that idea.
“With full participation, taxpayers rather than politicians would decide where the welfare dollars go.”
What a dream come true
I think this is a great idea. For all I care, the government could even engage in social engineering by varying the tax credit. A donation to my church would be worth, say, $1 off my taxes. A dollar donated to a university with a billion dollar endowment might be worth only $0.50, whereas a donation to a scholarship fund might be worth $1.50. A dollar donated for poor children to attend a pre-school could be worth $2.50.
Looks like a deduction to me. From the Department of Inland Revenue, Singapore:
Example
If your total statutory income for YA2012 is $100,000 (i.e. you earned $100,000 in year 2011) and you made donations of $10,000 to IPC in year 2011, your assessable income would be calculated as below:
Total statutory income $100,000
Less: Approved donations $25,000 ($10,000 x 2.5)
Assessable income $75,000
….unless they have flat-rate income tax?