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June 26, 2016

Paying for access

I can almost never find what I'm looking for at StatsCan, so bear with me while I take the long way around.

In 2012, Canadians gave $10.6 billion to charities. In Nova Scotia, people over 15 gave an average of $369, which works out to about $290 million.

The Grant Thornton tax planning guide says:
After factoring in provincial tax savings, donations in excess of $200 will save you anywhere from 40.2% to 50%, depending on your income level and province of residence.
So taking the low figure, the $290 million in donations represents a government subsidy of $115 million. Federal plus Provincial. They forgo $115 million in tax receipts to encourage charitable activity.

There are lots of kinds of charities. Social Services and Health (no hospitals) represent 24% of giving. I'm guessing your donation to a cure for Cancer or Type 1 Diabetes falls into those categories.

Says David Duff in the Osgoode Hall Law Journal:
Critics of tax incentives for charitable contributions have raised two objections to these indirect subsidies as a way of providing financial support to the charitable sector. First, tax incentives are an inefficient way to subsidize charitable organizations, costing more in foregone revenues than they produce in increased contributions. Second, tax expenditures for charitable contributions lack the rationality, controllability, accountability, and transparency associated with direct government expenditures.
Another problem is that there isn't a charity to match every worthy cause. Improved private infrastructure, which would equal a cure for many people using wheelchairs, just isn't a recognized charity. You can make a tax deductible donation to cure Cerebral Palsy, but not to Jennifer's of Nova Scotia for a ramp, which amounts to the same thing in a very specific case.

So it seems entirely appropriate to me that government extend the same nonrefundable tax credits to business that they do to individuals. Set a limit for sure, but underwrite 40% of accessibility expenses. Think of it as the best vehicle for the worthy goal of social equity. Not a gift to business, but a fulfillment of the Charter promise of equality

1 comment:

Gus Reed said...

A reader rightly points out flaws in my argument.

The existing credit is a credit, not a deduction, which means it's not regressive.

Since there is already a 100% deduction for expenses incurred in carrying out a business, which Jennifer's would qualify for if the prick would build a ramp, I guess you are asking a subsidy on top of that deduction.

I'm not sure you have thought through the tax policy implications of this.

I was looking for an analogy that makes the idea of a subsidy more palatable. Suppose you want to renovate and install an accessible bathroom for $25,000. This would be a depreciable capital cost. Depreciation seems to me to be a fictional concept, but it's accepted principle.

But motivating a business to spend the $25k is the problem. Over the depreciated life of the bathroom the cost might be zero, but weighed against the lure of a trip to Disney World, it loses its appeal.

The subsidy for charitable contributions is indisputable. And don't forget that charities generally pay few taxes otherwise - property and assets - I don't know all the details, but they're subsidized up the gump stump.

So we've decided that's a good thing. The search for a cure for spinal cord injury is a vast industry, profiting researchers who have little to show for our generosity. But a paraplegic using an accessible washroom doesn't need a cure. If their lives are fulfilling, a cure will be far from their minds.

The cure racket is for you, the accessible washroom is for me. Business incentives would have immediate and tangible results, so we should think practically and not be offended - we want to help with accessibility, by whatever means. We need to get over the idea that the only way to help people with disabilities is by curing them.