Section III then discusses the more prominent responses to critics, namely third sector theory and treasury efficiency.
In addition to appeals to values and the nondistribution constraint, the leading justifications or assessments of the deduction today generally involve third sector theory or treasury efficiency analysis.
Despite these advances, however, third sector theory and treasury efficiency alone appear inadequate for assessing the worth of the charitable tax deduction in key respects.
The putative inadequate provision of public goods plays both a normative and descriptive role in third sector theory.
Despite its prominent justificatory role in legal discussions of the charitable tax deduction, third sector theory appears limited in certain respects.
Normative conclusions of third sector theory depend on implausible, ungrounded assumptions with insufficient empirical validation.
In third sector theory, government decisions are said to reflect the preferences of the median voter.
For now, available evidence amply demonstrates that future charitable tax policy warrants broader assessment of these and related positive externalities than treasury efficiency and third sector theory offer.
93) Although treated together here, third sector theory has featured more prominently in the legal literature, while treasury efficiency analyses have generally been more dominant in policy assessments.
Although the term "subsidy theory" is sometimes used to refer to the narrower "third sector theory," the former implies any instrumental justification of the charitable deduction, whereas the latter implies a narrower set of justifications based on some form of market or government failure.
178) For instance, like third sector theory, treasury efficiency estimates presume that donations conform to rational choice assumptions such as marginal utility, utility maximization, and outcome-regarding preferences.