The Tax Code Hardly Cares About Volunteers

We’ve noted, all of us at one time or another, that the tax code favors capital over labor.  Which is to say the obvious, that returns to capital are taxed at lower rates than returns to labor.  We can debate the whys and wherefores, but that is a fact.  Capital means money or property, not labor, and the more a taxpayer has and employs, the lower the tax rate on gains.   In fact, a taxpayer with sufficient accumulated capital can lower the tax rate to zero by borrowing and delaying all realizations, something a taxpayer with even the most rare and sophisticated human capital could never achieve.   

So I am prolly gonna skip the Volunteer of the Month party.  Oh yeah, there is a big party going on all this month.  And last Friday, President Biden even signed a proclamation declaring this week “National Volunteer Week, 2023.”  Here is some of the proclamation:

Every day across America, volunteers are performing extraordinary acts of service.  They are repairing and rebuilding homes, educating our youth, and connecting people to jobs.  They are supporting veterans and military families, helping to run our elections, and combating climate change.  In the aftermath of natural disasters, neighbors volunteer to restore communities and cook hot meals.  And amid a pandemic, volunteers have stepped forward to help administer vaccines and provide lifesaving resources to people in need. 

Volunteering defines America.  Our Nation is a place where light triumphs over darkness, where we seek to lift everyone up, and where we lead not by the example of our power but by the power of our example.  As those who volunteer know firsthand, service also benefits the volunteer.  It can teach important skills, help build professional networks, and provide an empowering sense of purpose.  Volunteering brings people together, uniting us around our common belief in the dignity and equality of every person and giving us a chance to learn from others we might otherwise never meet. 

Thanks Mr. President.  The amount of human capital invested in civil society is not inconsequential so its appropriate that volunteerism be recognized as a national value.  According to some really good data gathered by AmeriCorps, “an estimated 23.2 percent of Americans or more than 60.7 million people formally volunteered with organizations between September 2020 and 2021. In total, these volunteers served an estimated 4.1 billion hours with an economic value of $122.9 billion.”   The Independent Sector estimates the value per hour of volunteer time in 2021 at about $30.00.  Those numbers seem to jive, indicating that Americans invested nearly $130 billion in nonprofit organizations.  

The thing is, none of that investment generates a tax return, the way $130 billion in financial capital does.  Its simple, really.  The tax code provides neither incentive nor reward for human capital investment in civil society because IRC 170 does not allow a charitable contribution for the value of services.  So who is more likely to donate services, and who more likely to donate capital?  And what  percentage of each census approved demographic group donates labor, labor and capital, and capital alone?  I betcha that as the demographic becomes tanner, browner, and blacker, the percentage of labor donors increases. 

I’m sure volunteers are happy for the recognition of a Presidential Proclamation.  And we all feel good applauding those who volunteer.  But true recognition would be what mostly white rich folks get when they volunteer money to civil society.  As it stands, the Tax Code remains true to its bias in favor of capital over labor — yes, even with consequences correlating to race deeply embedded and even when it comes to charity.

darryll jones