There is an amazing Seinfeld scene where Kramer asserts that it is fine to file a false insurance claim because the company can just “write it off”. Jerry counters, correctly, that Kramer does not even know what a write-off is. Kramer is not alone. I was listening to NPR on the way to work a few days ago, when they reported on a study on how the Tax Cuts and Jobs Act affected charitable giving. Recall that the standard deduction was doubled, meaning that far fewer people will itemize their deductions, instead claiming the much more generous standard deduction. This resulted in far fewer taxpayers being able to itemize their charitable contributions. The program said something like taxpayers “no longer have incentives to give to charity.” This is crazy, and to me, suggests these people “don’t even know what a write-off is”.
This is a sentiment I have heard many times, from many people—the notion that people give to charity for the tax break. That might be true. Stupid people. But, people who understand what a write-off is don’t give to charity for the tax break. Even at a very high marginal tax rate of 40%, giving $1.00 to charity still costs $0.60. If you don’t give to charity, you are still better off by $0.60. The biggest incentive people have to give to charity is because they are charitable—they feel some cause is worthwhile, and worthy of their cash. The tax deduction just makes it a little cheaper for those who itemize. This is a pretty minor point, but, every time I hear it, it drives me crazy. And I think of Kramer, and all those who “don’t even know what a write-off is.”
