Just to get behind the smokes and mirrors of income-tax deductions, let us take hard numbers. Suppose Mr. Gates' tax bracket (federal and state combined) on the last few millions of his income is in the vicinity of 40% (an underestimate). If the portion of his income in the final tax bracket was $100 million last year, he would pay $40 million in taxes, keeping just $60 million of it. However, since he contributed $50 million to charity, he would pay taxes on only $50 million -- $20 million in tax.
Now, just do the math. He has $30m in after-tax income, whereas he would have had $60m. His net contribution to Harvard? Thirty million dollars. Yet, Harvard gets $50m. Who pays the remaining $20 million? We do, with all our piddling taxes.
Of course, if Gates gave to Harvard in appreciated Microsoft stock, his net cost would be only $10m, making the rest of us pay $40 million on his behalf.
Charitable deductions redistribute income regressively. The taxes of middle-income families pay for the donations of the rich. It would be far less Byzantine, and more equitable, to abolish charitable deductions completely and simply lower the tax rates.
At least then, when Bill Gates gives to Harvard, or you give to the Red Cross, the money donated is all the donor's.