Here's my pitch:

Employers frequently withhold more than taxes from paychecks. For instance, when I worked at Starbucks, I could choose to have a few bucks a month taken out post-tax to help other Starbucks employees with financial crises. Right now, I get a pre-tax withholding for transportation reimbursements, which I get back by sending them receipts of my monthly BART ticket purchases.

But each of these withholdings is limited to a single non-profit domain: health, transportation, whatever. And most of them are self-centered -- your health savings account just goes to you. In the case of Starbucks, the crisis account only helped Starbucks employees. If you want to contribute your wages to fighting poverty, or to defending civil liberties, saving the environment, building museums, focusing on the family or whatever, you gotta do it yourself.

The best way to do this, right now, is to set aside X dollars a month, keep track of how much you donate, and try to acheive as much parity between the two amounts as possible. This would be much easier if you actually had a seperate bank account that held your charity money, but that's hard to do. It's possible to keep track of these things with Quicken or some such, but no one I know has the zeal for accounting that makes this a worthwhile undertaking. So we make willy-nilly donations whenever a worthwhile cause floats into our awareness, and hopefully the sum of those donations adds up to the holistic amount we feel we should be giving, but probably not.

So, what if there were a way to withhold X percent of your wages, pre-tax, and put it in an account that you can use as a fund for donating to various non-profits? Let's call them "giving accounts". Rich people do this by creating their own foundations. Why not democratize it by making those kinds of facilities available to Wal-Mart employees, Starbucks baristas, schoolteachers and other mere monetary mortals?

As far as I can tell, this would work out the same, tax-wise, as donating whenever you feel the urge. Under the current system, you get an income deduction letter when you donate to a nonprofit. With a giving account, you don't get the income and you don't pay the tax. Same thing.

I initially thought that you'd need to pass a law in order to make this pre-tax exemption kosher with the IRS. Preliminary conversations indicate that this is not true -- employers can take out money from paychecks pre- or post-tax, as long as the taxes square up in the end (or something). That's good.

Then we'd need to set up organizations to administer such accounts. With the right regulations in place to prevent malfeasance, account administration could probably be done by an organization that is itself a non-profit. It would be a large enterprise, but hopefully most of it could be web-based. The challenge would lie in convincing employers to make these accounts available to their employees. In many ways, that's just as difficult as getting a law passed. I imagine the best place to start marketing something like this would be in non-profits themselves. Companies like TIAA-CREF handle benefits for non-profits already. Giving accounts may be a natural extension of the services they already provide to employers.

So I imagine that when a new Starbucks employee becomes eligible for benefits, they set up a giving account and fill out the requisite paperwork for it in the same packet as the paperwork for their health care, their stock options and so forth. They get a username and a password which lets them log into their account and quickly make donations to 501c(3) organizations of their choice, or to set up automatic weekly/monthly/whatever donations. They get quarterly statements, and a yearly summary they can use for their taxes, instead of having a thousand donation reciepts they have to keep track of.

We'd also need to make sure that those giving-accounts organizations, and the companies that use them, are legally prohibited from restricting the range of organizations employees can choose to donate to. This would be subject to heated debate, but those prohibitions need to be in place to stay true to the spirit of giving accounts.

All this would be a good idea because:

  1. It makes thinking about donations much easier. You set aside a certain percent of your income for charity, and from that pool you can choose to make monthly donations to various places. Just like it's nice to have a different account for saving money for long-term me-stuff, it would be nice to have a seperate account for not-me stuff.

  2. Psychologically, I think people would donate more if all their giving was taken out of their paycheck before they deposited it. I like the idea of people answering the question, "How much of your income do you want to give to charity?" rather than the question "How much, if any, do you want to give to specific cause X? How about specific cause Y? Cause Z?".

  3. It creates a social institution of charity, sort of, that doesn't place value on donations to any specific organization, but instead appeals to the abstract idea of charity itself.

On the other hand, giving accounts would seem to be a bad idea because they are formed from the same conceptual DNA that gives us so many "starve the beast" market solutions to society's greater ills. And yet I wouldn't be too worried about it.

So, two questions for anyone who stumbles upon this post:

  1. Do you know of anything like this already?

  2. Would you participate in something like this?

Also: Yarr, matey.