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  Wednesday October 22nd, 2014    

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Changing the tax rate on donations a snatch and grab from charities (03/29/2009)
By John Edstrom


     
President Obama’s scheme to limit the deductibility of charitable contributions is destructive in itself, and the rationale he gives for it is downright obnoxious. For couples with incomes more than $250,000, ($200,000 for individuals), deductibility would drop from 35 cents on the dollar to 28. The way this works is that charitable donations can be deducted from taxable income, and the tax at that level is 35%. Imposing an artificial limit at 28% will simply cut the total amount available for charities by 7%, simple math. Put another way, the federal government will now help itself to $7 of every hundred given to charities in this category – sort of a philanthropy surcharge. Some will probably pony up more to make up the difference, but some won’t, and some will no doubt quit giving entirely, disgusted by the blatant grasping and greed of their government.

Think what that will mean in Winona. A short list of institutions that rely on the gifts of big donors are the Shakespeare and Beethoven Festivals, the Marine Art Museum, Historical Society, Community Memorial Hospital, St. Mary’s University, to an ever greater extent WSU, and don’t forget, all the churches. Based on the list of stimulus recipients I do not hold out the slightest hope that the President will spend that money more wisely than those whose energy and creativity generated it in the first place.

Part of Obama’s shabby rationale for this snatch and grab from the charities is that it is unfair that the bus driver should not be able to deduct as much of his donations as the $200,000 earner, (setting aside the high probability that the bus driver’s will be much less.) Fine. Let the bus driver deduct 35%, even though his tax rate is the 28%. I believe that he, too, will spend the money more wisely than the federal government. But to intimate that you are dispensing justice to the bus driver by soaking the big giver is to say that he will benefit from his church, hospital, or kid’s college getting along on roughly 7% less in big donations.

Obama’s remark to the effect that if a donation is truly charitable, tax ramifications shouldn’t be the determining factor, reveals either a naiveté or cynicism which is frightening to observe in the leader of the free world. Rich people do not save money through charitable giving, by manipulating the tax code. They can put $65 in their pockets and give the government the remaining $35 out of $100, or give the total $100 to charity. It is far more expensive to give than to take the income and pay the tax. Changing the limit down to 28% makes it 7% more expensive to give, which is the same as taxing it 7%, and everyone knows that the effect a tax has on a given activity is to make it scarcer.

J.E.

 

 

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