Charity Begins at Home? An Exploration of the Systemic Distortions Resulting from Post-Disaster Giving Incentives

Abstract

Looking back to the turn of the twenty-first century, there have been many major disasters, both here and abroad. These disasters all require significant private charitable assistance to provide for victims immediate needs and also see the area through cleanup and recovery. This article reviews a number of past efforts to encourage charitable giving through temporary tax provisions. While these are well-meaning efforts on Congress’ part, temporary provisions have some significant disadvantages. First, they treat different victims with similar harm differently. Second, they are not enacted following each major disaster. Third, both equity and efficiency would be improved if disaster relief contributions were addressed in a single permanent provision with fixed triggers and established thresholds for incentivizing charitable giving for disaster relief. This article concludes that a permanent approach should be adopted to improve the aid available to disaster victims. This would also reduce political infighting at the time a disaster has occurred. Ex ante any Congressional district could be hit by a major disaster, everyone should support a permanent solution.