Economy & Budget

Charitable deductions on the chopping block

Charitable deductions on the chopping block

William Bigelow at Breitbart News notes that “the White House is pushing hard for reducing, or even eliminating, the tax deduction that is given when one makes a charitable donation,” an idea the nation’s charities obviously don’t like:

Top White House aides are threatening nonprofit groups to support Obama in his desire to reduce their deductions in order to cut the federal deficit and avoid the “fiscal cliff.”

The United Way, the American Red Cross and Lutheran Services in America have joined forces in fighting Obama.

Diana Aviv, president of Independent Sector, which represents a number of non-profit organizations, warned, “It’s all castor oil. And the members of the nonprofit sector I represent don’t want any part of it. It’s a medicine we’re not willing to drink.” The non-profits have spent more than $21 million in fighting Obama for the past three years.

Because Obama is using the looming fiscal cliff as a club to beat opponents into submission, there has been increased concern from the nonprofit charities. They are worried that if the deductions are put into place, wealthy donors would be more reluctant to give to the charities.

Jatrice Martel Gaiter, executive vice president for external affairs at Volunteers of America, admitted, “It would be devastating. Of course people want to say they are giving out of the goodness of their hearts, and of course they are, but the tax deduction makes our hearts larger and our goodness even better.”

This really caught my eye because I had to sit through an hour of thick, creamy conference-call sanctimony from the silly “Responsible Wealth” band of tax-me millionaires, who are pushing for estate taxes to be radically increased, to the point where such taxes would begin well above the already confiscatory rates, and get worse from there.  And one of the points they drove home with jackhammer enthusiasm – mentioned, if memory serves correctly, by every single one of their speakers – was that higher estate taxes would prompt more charitable activity by rich people.

The idea was that millionaires who didn’t want to see Uncle Sam grab over half their estates would donate the money to charity, because such donations are tax-deductible.  This point was pushed very hard by the Responsible Wealth team.  In fact, they were so big on it that I found it strangely inconsistent with the rest of their message, which was all about seizing the estates of the rich to pay down the deficit… or give the government more money to spend on its wise and virtuous programs, depending which Responsible Wealth representative was speaking.  Well, okay, that’s not even true: former Treasury Secretary Robert Rubin made all three of these contradictory promises all by himself.  He said the higher estate taxes would pay down the deficit; but it was important to seize the estates of the wealthy because government can spend their money for greater social benefit than their rightful heirs; and the millionaires would donate lots of their money to charity to avoid the tax anyway.  It was, as I wrote at the time, a very Mad Hatter’s Tea Party type of group, taken with absurd gravity by far too many media people.

But here we see that the Left is trying to take away the very charitable deductions that were such a big selling point for those higher estate taxes.  Of all the “loopholes” government should be trying to close, this is one of the last that should be on the chopping block.  Among other things, it nullifies one of the core arguments for Big Government, which is that money should be taken away from profitable investment and savings made by individuals, and spent in ways that will bring greater “social benefit.”  That’s silly to begin with – investment creates jobs, which is among the healthiest benefits any society could want.  But private charities are far more effective at disbursing money for altruistic ends than the government, with much less crippling long-term dependency as a result.  We should not be increasing the government’s already outsized role as a “charitable” entity.

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