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The End of Charitable Giving?

Today I spent the afternoon at Larry H. Miller’s beautiful funeral service in the Energy Solutions Arena, listening to his family describe the marvelous man that he was. Among other things, Larry was a first-class philanthropist. With no fanfare or media attention, he once gave a considerable sum of money to a non-profit arts organization with which I was affiliated. He did so with no thought for recognition, and, indeed, preferred that his donation be kept anonymous. Since then, the organization has publicly acknowledged him as a financial benefactor, so I don’t think I’m betraying any confidences here, but I don’t want to provide any more details than that out of respect for his initial request for anonymity.

Gifts like Larry Miller’s largely go unnoticed. But if Barack Obama gets his way, future gifts of a similar nature will likely go ungiven.

Consider: as part of his plan to stick it to the rich, President Obama’s proposed tax plan calls for the elimination of itemized deductions for any income over $250,000 per year. And I can almost hear the class warriors cheering in the cyberspace transoms…

“Here here! It’s time the fatcats paid their fair share! No more huge bonuses for CEOs while the working guy gets squat!”

Well, not so fast, working guy.

If Obama’s tax plan had been in effect, Larry Miller’s gift to our arts organization would not be tax deductible. Now Larry was a remarkable enough guy that he might have given the gift anyway, but my guess is it would probably have been a much smaller gift. And not all benefactors are as selfless as Larry Miller was. If you eliminate the tax advantage for charitable giving, then, as surely as the sun rises in the east, you’re going to eliminate a lot of charitable giving by the people who have the most to give.

Which means a whole host of charitable organizations will shrivel up and die.

There’s a certain poetic justice in the fact that the first ones to go will likely be the artsy fartsy frufru theatres that rail on the evils of capitalism while going cap in hand to every wealthy businessman in their community, begging for largesse. Arts organizations enforce a rigid ideological orthodoxy; most of them consist primarily of committed leftists who voted for Obama. But now that Obama’s government will now be taking a forty percent bite out of any donations in the future, there will be less money available and no rich patrons incented to part with it.

These guys have unwittingly dug their own artsy-fartsy graves.

And it will extend beyond the arts. You’re going to see the Red Cross and other humanitarian groups see a sharp drop in revenue. Churches are going to watch their coffers shrink by more than a ten percent tithe. It is axiomatic that when you tax something, you get less of it. Obama can pass any law he likes, but he cannot repeal the law of supply and demand.

Charitable contributions work because they’re surgically efficient. The patron donates to the cause he or she finds worthy, and the government allows the transaction to happen tax free because of the positive societal benefit. But under Obama, government will suck up all those dollars and spend them as inefficiently as possible, and the result will be a lot more lefty artsy-farsty types out of work.

So it’s not all bad, I guess.

The Pie

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  1. It’s backwards land now. What was good is bad and what was bad is good. Pretty sure Obama is willing to trade the arts for many churches that also depend on charitable giving.

  2. Well, this also means that you’ll start seeing a salary cap at 249 K. To avoid all the problems of paying (and making) 250K +, things will cap right below it, and other perks will show up in its place.

  3. If this is true, I wouldn’t rule out the idea of it being an intended effect. By reducing charitable activity, the Obamessiah increases the need for government intervention.

  4. from ANSWERS.COMcharityn., pl. -ties. 1. Provision of help or relief to the poor; almsgiving. 2. Something given to help the needy; alms. 3. An institution, organization, or fund established to help the needy. 4. Benevolence or generosity toward others or toward humanity. 5. Indulgence or forbearance in judging others. See synonyms at mercy. 6. often Charity Christianity. The theological virtue defined as love directed first toward God but also toward oneself and one’s neighbors as objects of God’s love.NOTE (from me): doesn’t seem to say anything about “only if 40% is reimbursed because it is tax-deductible.”POUNDS

  5. POUNDS,Perhaps this is not my place to engage in debate….but I’ll do it anyway (to save Stallion Cornell the trouble). I think we all agree that charity is good and necessary, but I think SC’s point was that by removing the tax benefit, charity would decrease. Do you deny this?

  6. Jim,No, I don’t deny it; but remember we are talking about whether people who are in the top 2% of earners in the country should have all of their charitable contributions (in effect) paid for by tax dollars from the general population.Let them pay it in taxes and have the ELECTED legislative bodies determine how it should be distributed: e.g. roads,schools, public health, defense, charitable organizations, law enforcement.Why should I (or you) pay 40% of a millionaire’s contribution to his favorite charity?But, yes, I agree with you and SC that some rich guys will reduce their contributions (and perhaps find some other tax-dodge). I think out society can (and probably should) live with that.POUNDS

  7. POUNDS,I should first admit that I’m getting in way over my head with this discussion. I’m a political/financial novice at best. So please go easy on me.If I understand the proposal then, it is that instead of a donor choosing his/her charitable donations and receiving a tax advantage, the new plan would likely dis-incentivize (is that even a word?) charitable donations and increase the amount of taxes paid. In effect, are we saying that elected officials can decide better than we can how to use our hard earned money? If that is the case, it doesn’t make sense to me….I realize that some tax is fundamental to government, but allowing government to make more decisions for us seems to be taking things a step too far in my opinion.

  8. Jim,You aren’t in over your head. You are simply expressing another point of view. Personally, I think that’s what makes this blog work so well.We differ on the issue because of how we are looking at it.You see the change as a “tax increase.” I see it as people paying their full tax responsibility with less of a “deduction” from their fair share of the tax burden.There is no increase in the tax RATE. Just as they eliminated the deduction for interest paid on credit cards (in the 1990’s), this would be a change in the deductibility of charitable contributions for rich people. (Unless you make over a quarter of a million a year, this doesn’t affect you.)Of course, you are not alone in believing you could make a better choice on how the money should be spent. But, remember, there has been a majority against the war in Iraq for a long time….. but we didn’t get to not pay taxes for it and spend it on something we knew was better.Have a good day,POUNDS

  9. I don’t make a quarter of a million, POUNDS. And this will affect me in drastic ways. I work for a 501 (c) (3) that teaches a cognitive behavioral model to probationers and parolees. We rely entirely on donations, and all of our donated money has come from rich people. Our business will fold up if this goes through. My children will likely pay much higher tuition once colleges can no longer raise endowment funds from rich people. I think my church will be all right, as rich people still feel enough religious guilt to pay tithing, but every arts organization I know will likely collapse entirely if this goes through. This does not just affect those who make the donations; it affects the millions upon millions who benefit from them. This is a sea change in the foundation of the American economy, and the effect will be devastating for rich and poor alike.

  10. A tax deduction was given on charitable donations because it has been generally accepted that it is beneficial for society to give money to ANY worthwhile charitable institutions that you choose, whether wealthy people or otherwise are making the donations. This is the same reasons why tax benefits have traditionally been extended to married couples, and even greater benefits to families with children – these things have always been considered good for society as a whole. Now President Obama wants to change this. How is it a tax dodge to give away your hard-earned money to an institution that will benefit society? You are not paying taxes on money that you earned but that you did not keep, and instead donated for the good of society. This is sort of a form of self-taxation, only instead of giving the government power over your money (and thus whichever wacko political party happens to be ruling at the moment), you have some degree of assurance as to how your money will be used. This is very different from funding a war because the government claims that power. The government does not claim the power to decide which artsy-fartsy local theater groups, legal defense funds, free-speech groups, churches, etc. are worthwhile and which are not. We are entrusted to be able to determine that as our individual consciences dictate.Governor Schwarzenegger and the socialists in CA legislature just took away $200 per child tax credit without public review or floor debate, effectively adding $1000 in state income taxes to my family annually. Talk about a regressive tax! It is backwards land. Everything that was good for society is now bad for society, and vice versa. Unbelievable. If I didn’t have good employment in CA in this difficult job market, we’d have packed our bags, loaded the pickup, and been on I-15 North long ago.

  11. Given that the 10% who are most affluent in the US hold 70% of the accumulated wealth – I would not be overly concerned on their behalf and start second guessing their motives. Additionally with 33% or so of the giving in the US being to religious organisations one could easily be excused as calling subsidising religion as well. People, who earn over 250k – and I am one of them – have to pay more tax. Big deal, their life is not going to end and their family will not suddenly be destitute. In fact health care will be easier to access and there may even be better schools and infrastructure. I pay tax (lots more than you can imagine) and make an active choice not to detax or bank offshore. I even voted for political parties knowing i would be taxed more! I am still rich both in relative and absolute terms. I dont get the fuss unless you adhere to theidea that the primary objective of life/democracy is the accumulation of material goods and that this is the sole impertive in the pursuit of a “good”, in the platonic sense, life. Abbot

  12. Mr. Abbot… your commentary betrays a couple of false assumptions. Firstly, that religions are not good and therefore should be taxed similarly as capitalistic businesses, and secondly, that government uses money more wisely than religion. Life is not about accumulation of goods. It is about using your personal resources as you choose to bring you the most joy you can. Many mistakenly believe this can be found in material wealth, and they often discover they are incorrect. But they should be free to choose for themselves. We have a fundamental difference of opinion. I believe that government re-distribution of resources is perhaps the worst method for spreading good, and you believe it is better than individual choice. You are correct that life will not end and those earning $250k will become destitute if charitable gifts are taxed, but some who rely on these charitable gifts for life may become destitute. Even so, the giver still has a choice to make, no matter what the tax rate. But government should do everything possible to encourage giving, not punish or restrict it. No government should tax money spent to further the society it pretends to support. And religion supports society in important and grand ways. And so do the other 66% (your number) of charities.


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