Proposed: donation mechanism for people doing direct work (USA tax relevant)

By david_reinstein @ 2022-11-28T20:06 (+24)

Upgrading and updating this short-form

Preamble

Employees at EA orgs and people doing direct work are often also donors/pledgers to other causes. But charitable donations are not always exactly 1-1 deductible from income taxes.  E.g., in the USA it’s only deductible if you forgo the standard deduction and ‘itemize your deductions’, and in many countries in the EU there is very limited tax deductibility.

So, if you are paid $1 more by your employer/funded and donate it to the Humane League, Malaria Consortium, etc, the charity only ends up with maybe $0.65 on the margin in many cases. There are ways to do better at this (set up a DAF, bunch your donations…) but they are costly (DAF takes fees) and imperfect (whenever you itemize you lose the standard deduction if I understand.)

This might be somewhat timely because of (1) loss of funds from FTX thing (2) EA employees feeling guilty if they think they benefited from the FTX thing.

Proposal

Funders/orgs (e..g, Open Phil, RP, FHI, CEA) could agree that employees are allowed relinquish some share of their paycheck into some sort of general fund. The employees who do so are allowed to determine the use of these funds  (or ‘advise on’, with the advice generally followed). I think this should generally not go back to the org they work for itself, for reasons alluded to below. 

Key anticipated concerns, responses

Concern: pressure

This will lead to a ‘pressure to donate/relinquish’ if the employers, managers, funders are aware of it.

Response: This process could be managed by ops and by someone at arms-length who will not share the data with the employers/managers/funders. (Details need working out, obviously, unless something like this already exists.)

This is also a reason to make this explicitly not go back to the employing organization.

Concern - Legal issues

 Is this feasible? Would these relinquishments be seen by governments as actually income?

Response: I've consulted a one person with expertise who suggest this would not be a problem as long as

- It is clearly a salary reduction 
- The promise (to target the cause the employee wants) is only implicit; the employer/organization has the ultimate control; 
     - This is something like the situation with a donor advised fund (DAF) if I understand it

Note, 'it is pretty normal' for one nonprofit to pass money to another nonprofit. 
 

Concern - crowding out

 If the funder knows that the people/orgs it funds give back to other charities, they may shift their funding away from these charities, nullifying the employee's counterfactual impact.

Response:  This is hardly a new issue, hardly unique to this context; it’s a major question for donors in general, through all modes; so maybe not so important to consider here.

… To the extent it is important, it could be reduced if we can keep the exact target and amount of the donations unknown to the funders.

Concern - “Org reputation … why not give back to the org?”

Maybe a stretch, but I could imagine someone arguing “If EA-ORG's  employees ask you to redirect paychecks to a fund, which largely goes to the Humane League, Malaria Consortium, … does this indicate EA-ORG's employees don’t think EA-ORG is the best use of funds”?

Response 1: Unlikely to be a concern. Employees may want to ‘hedge their bets’ because of moral uncertainty, and because of the good feeling they get from direct impact of donations.

Response 2: Keep the recipient of these funds hidden to outsiders.

Thoughts? Do you think many people would take this up? What am I overlooking here?