Wednesday, February 9, 2011

Volunteerism as a Tax Strategy?

The idea of rewarding volunteer hours with a tax break has been bruited around recently, and has caught my attention for a couple of reasons.

The first issue with this as an incentive to volunteerism of course is that the incentive has nothing to do with the reasons Albertans volunteer so extensively. There is no tax reason to do so now, and Albertans apparently volunteer as much as any population in the country. Clearly we have good reasons to do so that have nothing to do with our annual tax bill. We choose to become involved in sports leagues, drop-in centres, food banks, choral societies and even political parties because they allow us to realize our dreams or reach out to others. Given what we, as a society, are prepared to pay for convenience in food or parking, among a myriad of other things, it hardly seems likely that people will exert themselves to do something they wouldn't have done before just because of a small tax rebate.

In addition there are a great many opportunities for tax breaks as it is, ranging from business investment to home improvement. Those who would most benefit from a relief of their tax burden are those in lower income brackets, and there are far more efficient ways of delivering that relief than a credit for volunteer hours. A simple raising of the basic income tax exemption by $10-15,000 would be a far more effective tool in this instance. Coincidentally this idea, like so many others, would benefit from an open discussion of our province's ends and means with all options on the table, as is being called for by Doug Griffiths of the PCs and by the Alberta Party.

More important than the vague connection being asserted between volunteerism and tax relief are the administrative issues this proposed reform would create. In order to manage and administer this new tax break a burden of increased administrative costs and government red tape would be imposed on charities and non-profit groups. In essence one of the unintended side effects of this proposal would be an increase in the 'administrative slice' of every dollar donated to charity. In short increased administrative costs would eat into the percentage of donations that would actually be used to deliver service.

The idea of rewarding community involvement with a tax break seems to me rather fuzzy in its goals. If the goal is to reduce the tax burden then actually lowering taxes would seem to be the way to go. If the goal is to increase community involvement then there are all kinds of other inducements, from community project grants on the positive side to cutting funding for community services on the negative side, that will further that goal without increasing the burdens borne by our not-for-profit sector. In short this proposal amounts to a small and poorly aimed tax cut for a group that will continue being involved in these organizations without it. We won't stop organizing our children's hockey leagues or helping at Brown Bagging it For Kids if no tax credit for volunteerism is introduced. Those organizations will, on the other hand, potentially be disrupted if such a change is made.