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.


  1. Hi Alexander,

    Not sure if you are directly referencing the Wildrose social policy with this blog, since you don't mention us by name, but the "bruiting around" of the volunteer tax credit idea began with the release of our policy. It can be found here.

    It's worth mentioning that the volunteer tax credit we propose is optional. If a non-profit thinks it can attract more volunteers by issuing tax credits, it can choose to do so. If it feels it would be too burdensome from an administrative perspective, it doesn't have to use it.

    We're offering it as a tool.

    Hope this helps.

  2. Thanks for the response Brock.

    I wasn't actually talking about the Wild Rose policy in particular, since as far as I am aware it is still only the one-sentence statement on the website. The topic has been one of conversation in my circles for perhaps a year or so, though it has been brought to something of a boil by the Wild Rose release.

    To address the Wild Rose statement specifically the 'optional' out would serve to allow organizations to make a rational decision based on their needs. That said any organization 'opting in' would still be accepting a greater administrative cost. Making it optional would also simply serve to make the "self-selecting tax cut" objection stronger. As a tool it still looks to me like a solution in search of a problem....

  3. Alexander.

    Wildrose has always supported and promoted "open discussion" on issues and is THE strongest proponent of more open and transparent government. Please resist the lure of partisan politicking if you wish to promote "open discussion".

  4. Rick, thanks for reading.

    A few points:

    First, what have I said here that doesn't contribute to an open discussion? I have laid out my views on a topic, and am having the conversation with those who respond.

    Secondly, I don't see what is partisan in this piece, other than perhaps the observation about Mr. Griffiths and the Alberta Party being the only groups in the political discussion at this point asking to discuss all options, including progressive taxes, sales taxes etc. If I am mistaken I am certainly open to being corrected!

    Finally, how are partisanship and open conversation contradictory? Are you not seeking the nomination of the Wild Rose in your constituency? Does that make it impossible for us to have an open conversation because I am not a member? I should certainly hope not.

  5. Hi, Alexander.

    My words were chosen carefully and not accusatory. Yes, the reference to a partisan position is based on your mention of only two of the current political parties as promoting "open discussion". Perhaps only an error of omission, the comment can be interpreted either of two ways.

    Your tweets tend to indicate your support for the Alberta Party and that's great. I have openly supported this initiative and many of the tweeting Alberta Party members. My own values are more aligned with the Wildrose Alliance.

    You should notice I am trying as hard as anyone else to foster an open dialogue among those who show interest in changing how politics is done.

    I won't feign my loyalties and I won't ask then answer my own questions under the guise of having an open discussion.

  6. Rick,

    I'm not sure how to take that last sentence, as I certainly haven't feigned anything in my views, and the exchange we are having isn't the guise of an open discussion - it is one.

    Like yourself I am a great believer in the importance of an open conversation about public issues. I'm also a believer in the importance of diversity in the public sphere - more viewpoints leads to better conversation and ultimately a higher level of ideas. We all need to be challenged!

    On the issue of tax credits for volunteer hours what I see is an inefficient and awkward system, the benefits of which would be better addressed by raising the basic income tax exemption. Many people will disagree, but hopefully this will be part of a larger conversation about how we as a province wish to structure our taxation. As far as I am aware most of Alberta's parties have not committed to such a review, hence my 'partisan' comment. As I have said, if I am wrong regarding that point I will be happy to correct my post.

    I look forward to a lively series of exchanges with you over the months and years to come! :-)

  7. Alexander,

    How would "raising the basic income tax exemption" recognize the generosity of Albertans who give of their valuable time rather than their valuable financial resources? I see anything that encourages a culture of giving (time or money)to your community as good practice.