Tax Roundup, 9/4/2012: Kidney edition. Also: stopping refund theft, and more!

September 4th, 2012 by Joe Kristan

Kidney dialysis patient. Photo via Wikipedia Commons.

Dying for a kidney: the limits of tax incentives.  A new study in the American Journal of Transplantation says that state tax breaks for live organ donations haven’t increased donation rates.  NPR reports:

Seventeen states offer tax incentives to people who donate a kidney, a portion of their liver or bone marrow for transplantation. But a study finds these sweeteners aren’t working.                            

Researchers looked at what happened in the years before and after these tax incentives were passed and found no increase in organ donation rates.

Why don’t organ donation tax breaks work?  NPR approaches the obvious reason:

Typically states offer a deduction of up to $10,000 from taxable income. For a typical family that translates to less than $1,000 in reduced taxes. But the financial burden for a living kidney donor can range from $907 to $3,089, according to one study.

The shortage of donor kidneys kills thousands of patients annually, and many who do finally receive donor organs have to spend years on debilitating and expensive dialysis first.  The tax incentives are a well-intentioned workaround to the real problem, mentioned in passing by NPR:

By federal statute, it’s illegal to pay someone for the organ itself.

Thanks largely to Al Gore, it is a serious crime to attempt to save your life by buying a kidney from a willing seller.  Under federal law, it’s legal to save somebody’s life by giving them your kidney, fully accepting the inherent medical risks, but it is illegal to be compensated for those risks by the donor.  Somewhere there is a market-clearing price that would match donors with the 4,000 or so people who die annually waiting for kidneys.  Until and unless the tax benefits of kidney donation reach that price — and the lack of a market makes it impossible to know what that price is — the tax breaks will be a mere gesture, rather than any kind of solution.

(Disclosure: I served for several years on the board of the Iowa Donor Network, the “OPO” organization that oversees organ donation and distribution in Iowa.  I am not currently on the board, and I don’t speak for them in any way.  Sally Satel powerfully makes the case for compensated donation here.) 

Related:  A Kidney For A Tax Break? (TaxGrrrl)


How can Congress stop giving billions annually to thieves?   At the Tax Policy Blog will Freeland explains the basics:

IRS’s National Taxpayer Advocate found that tax code complexity is a contributing factor to the estimated $10 billion to $12 billion in fraudulent or erroneous overpayments made to those claiming the refundable earned income tax credit in 2006. Rather than invest in a costly system of fraud reduction, these social assistance payments could be administered with more oversight by the Social Security Administration or State public assistance offices—agencies that already have such fraud reduction systems in place.

The purpose of taxes should be to fund the necessary functions of government, not to incentivize behavior or pay out social assistance. A simpler tax code that focuses on this core purpose will reduce fraud, in addition to lowering compliance costs and removing economic inefficiencies.

Unfortunately, politicians  don’t mind wasting billions of your dollars on thieves while preening their concern for the downtrodden.


Quote of the day.  David Brunori speaks wisely (subscriber link):

Legislative auditors in New Mexico discovered that the state, through its economic development incentives, is spending $31,000 for every job created. The problem is that the jobs purported to have been created pay on average $41,000 a year. What’s more, the legislative staff found that the state did a pretty lousy job of evaluating the incentive programs.

     The head of the Economic Development Department blasted the auditors, calling their assessment wildly inaccurate. I, too, am skeptical of the numbers, but for different reasons. I don’t believe the state is providing any incentive for job creation. Businesses create jobs when they think they’ll get a return on the investment. Although it’s impossible to be sure, I believe that most of those jobs would have been created anyway.

     The legislative auditors called for some good government changes to the incentive programs. For example, the audit report calls for more public disclosure, sunset provisions, and clawbacks. Those are all good policies, of course. But what someone should recommend is that New Mexico stop giving tax dollars to private companies.

That’s just as true in Iowa, whether the tax breaks go to movies, fields of dreams, or windmills.


Patrick Temple-West,  Essential reading: Candidates split over tax credit for wind energy, and more (Tax Break)

TaxProf, WaPo: Mitt Romney Exited Bain Capital With Rare Tax Benefits in Retirement

Russ Fox, Joseph Pleads Guilty.  Fortunately it was some other Joseph.

Jack Townsend,  IRS Data-Mining Program re Offshore Accounts; with a Diversion to the Real Golden Rule

William Perez has some tips for Finishing up 2011 Tax Returns for the October 15th Deadline.  Remember, non-1040 extended returns are due September 15.

Kay Bell offers  Tax Carnival #106: Labor Day 2012,

We had a long weekend — but you can still catch a Buzz from Robert D. Flach!

Jim Maule, Tax Labor

It’s a blog, not the 1040 instructions: Please Do Not Prepare Your Tax Return Based on Anything You Read Here (Anthony Nitti)

It was declared out of order by the rules committee?  What Happened to Tax Reform at Mitt Romney’s Convention? (Howard Gleckman)

That clears things up: Google Plays Bess Truman To Jill Stein As Harry (Peter Reilly)

That’s kind of personal.  Are You “Whipped”?  (Brian Strahle)


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