An FSA for Charitable Donations?
Posted in Policy with tags charity, donations, FSA, myanmar, tax breaks on May 9, 2008 by davidoarrThis Myanmar incident has me thinking about charitable giving and the difficulty inherent in a dynamic economy to both budget for and manage philanthropic activities. The increase in gas and food prices along with the uncertainty created by the ongoing economic malaise has stretched many American budgets to the breaking point. Because media exposure to a crisis is concentrated around the time of the crisis, the ability of most small donors is limited to their monthly disposable income, which in many cases may be negative. While there is a tax-incentive for donating to exempt organizations and causes, the incentive is weakened because it is delivered based on the federal accounting cycle rather than at the time of the donation.
I think what we need is a new set of tools that facilitate better control over budgeting and planning for philanthropic events. I think something similar to the Flexible Spending Accounts that many Americans currently use to put money aside pre-tax for health care and dependent care costs is the right model. The problem now is that while donations are tax deductible, I have to wait as much as a year to ever see that tax advantage. Also, I have no incentive to budget ahead of time for my philanthropic ventures. The system is much too ad-hoc now.
With an FSA for Charitable Donations, I could set aside a certain amount every paycheck and realize the tax savings immediately. The other advantage is that I could hold a percentage of my donations through out the year in case something like a tsunami or typhoon event occur and then have a much larger reserve from which to give. If we go an entire year without an event, I can just disperse a little bit more money to each of the organizations that I would normally support.
From a business perspective, if it was run like an FSA, employers would have a much better idea how much if not to whom their employees were donating. That’s certainly good from a CSR public relations point of view.
