South-Western College Publishing - Economics  
Give a kidney; cut your taxes.
Subject Wisconsin and other states begin to offer tax breaks for living donors of kidneys.
Topic Supply and demand; Utility and consumer choice; Government and the economy
Key Words

shortage, living donation, organs, UNOS, tax break

News Story

Donated organs are in short supply, and governments think they have a partial solution to the problem: offer tax breaks to donors.

An average of 17 people die daily waiting for donated organs, according to the United Network for Organ Sharing. A total of 87,000 people are awaiting new organs that may or may not ever come. To combat the shortage, Wisconsin and a number of other states have decided to implement tax policy to help bolster the supply. While the federal tax code currently offers no deduction for organ donation, Wisconsin allows a state deduction of up to $10,000 to cover the travel, lodging, and lost wages associated with donating living tissue--defined as liver, pancreas, kidney, intestine, lung or bone marrow. This applies solely to living donors, not to the estates of deceased donors.

The American Medical Association plans to vote soon about whether to adopt a set of ethical standards for living organ donation. The AMA draws the line, however, at the idea of offering any payment beyond costs directly associated with the transplant process itself, including lost wages. Payment for organs themselves is considered unethical and unacceptable, especially given the 1984 federal law that prohibits organ sales to non-relatives.

Questions
1.

Demonstrate the current organ donation shortages graphically with supply and demand curves.

2. What impact would Wisconsin's tax break have on the budget constraint of a living organ donor? Illustrate this on a graph with labor time on the horizontal axis, and money income on the vertical axis.
3. If the goal of the policy is to compensate donors for the costs associated with transplantation, why would it cover lost wages? Use economic arguments to argue whether or not lost wages should be included.
Source Rachel Emma Silverman. "A Tax Break for Your Kidney." The Wall Street Journal.. December 2004. D1.

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