The dual subsidy theory of charitable deductions

Ilan Benshalom*

*Corresponding author for this work

Research output: Contribution to journalReview articlepeer-review

17 Scopus citations


Americans contribute billions of dollars to charities on an annual basis. Charitable contributions not only represent American generosity, they also represent a form of giving that provides donors with tax relief. The current literature on charitable contributions suggests that this relief plays an important role not only in decentralizing the provision of public goods, but also in helping the nonprofit sector provide public goods more efficiently than government spending. Even if these claims were indisputable, they are insufficient to justify the current scheme's antidemocratic function. This Article argues that, at their core, tax-subsidized contributions are part of a nondemocratic mechanism that allows individual donors to direct public funds while bypassing majority approval. Despite the nondemocratic attributes of charitable spending, this Article recognizes the virtue of charitable spending in voicing preferences not accounted for by the majoritarian process. Therefore, while the current literature suggests that charitable tax relief represents a substance subsidy-by promoting the allocation of resources toward a confined set of legislatively enumerated public goods-this Article argues that it is also a process subsidy that supplements the shortcomings of majority decision making. This dual subsidy approach leads to the inevitable conclusion that the current U.S. charitable tax relief scheme undermines the integrity of the majoritarian process, because it disproportionately subsidizes the process component of affluent taxpayers. To better reconcile with democratic theory, many of the scheme's attributes-for example, tax subsidies to corporate philanthropy-should be reconsidered and restructured. In raising this point, this Article opens a broader debate about the proper role of majority decision making and efficiency claims in legitimizing democratic tax and spending decisions.

Original languageAmerican English
Pages (from-to)1047-1097
Number of pages51
JournalIndiana Law Journal
Issue number4
StatePublished - Sep 2009
Externally publishedYes


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