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Charities squeal at math of Obama tax increases on the wealthy

Charities squeal at math of Obama tax increases on the wealthy

Update — Charities’ pain is the nanny state’s gain

The “rich” are going to be taxed at higher rates, either directly through higher marginal rates as Obama insists, or through closing “loopholes” and/or limiting deductions.  Or both.

Of course, many of these people do not consider themselves rich.  The professional couple or small business owner making $300-$500,000 in a large urban area, who receives no financial aid for their children’s college tuitions, who already has lost most credits and deductions, and who subsidizes others in a myriad of ways, don’t think they are taking advantage of anyone.  Yet they are the target of Democrats.

I have speculated that restrictions on charitable deductions for the “rich” may hurt left-leaning political-oriented organizations the worst, which may not be such a bad thing.

Regardless, the charitable industry is fully aware of the implications even of limiting deductions, and it is instructive to see the damaging math which is relevant not just to charities, Do the Math: Abolishing the Charitable Deduction Will Cost Charities Billions (h/t PolitiJim)(emphasis mine):

To understand why the affluent think this way [cutting back on donatios], consider what it costs a donor to make a $10,000 gift today. If she is in the 35-percent tax bracket, her after-tax out-of-pocket cost is $6,500.

If Congress abolishes the charitable deduction, the new cost is not just the $10,000 the donor gives but also the approximately $5,400 in increased taxes on the $15,400 she will have to shoulder to earn enough to make the $10,000 gift.

And if federal tax rates go up at the same time, that means an even higher after-tax cost of everything, not just charitable gifts. Even the wealthiest Americans have limits on how much they feel they can afford to give, and a sharp rise in the cost of charitable donations and the burden of new tax increases could reasonably cause many to give less.

If every donor of $10,000 feels the after-tax cost of giving go up (by as much as 50 percent for high-income donors), then many Americans, no matter how well intentioned, are no doubt going to give less.

Another way to think about this is that the federal government would essentially be asking charities to forgo a portion of the gifts they receive from individuals to help close the federal budget gap.

Attacking the “rich” through higher taxation, which is the heart and soul of Obama’s politics, attacks the charitable base the hardest, as the article notes:

To minimize the impact of any limits on deductions, the White House has repeatedly suggested limiting the charitable deduction for people who make more than $200,000 a year.

Unfortunately, that would hit hardest the very people who give the most.

In 2010, the most recent year for which data are available from the IRS, people with incomes over $200,000 made 41 percent of all gifts people deducted on their itemized returns.

Newly released IRS data show that it is those people who decreased their giving the most during the worst of the recession.

Demonizing and isolating the “rich” has trickle down pain.  But it will be emotionally satisfying to the Democratic base.

Update:  I think I failed to fully appreciate why charities’ pain is Obama’s gain.  As a reader just e-mailed:

I think that what you are missing (or maybe not, you might have posted on the subject and I missed it) is that a cutback on charitable giving will be considered a feature not a bug by the big government types.

Who will those in need turn to if the private sector doesn’t come through?

Big government

And SoccerDad added on Twitter:


Donations tax deductible
to the full extent allowed by law.


Private charity competes with government. Government should be the source of all things. So private charity has to be squeezed out of existence. Simple Leftoid logic.

One look at most liberal politicians’ tax returns will tell you that they don’t believe in, nor do they care about, charity work.

And yet – most workers at charities vote Democrat.

Too damn bad, eh?

Or, as Mark Steyn would have it…

“As government gets bigger, everything else gets smaller”.

When judging what this government will do in any particular situation, one must stop assuming that government will act in the best interests of a) the citizen/taxpayer b) the Nation c) itself.

Those modes of thought are inoperable.

Government currently looks upon most charitable Orgs as competition or needless interference in the direct relationship between it’s “clients” and itself.

They are competitors and as such should be marginalized and penalized as often as possible and that they can get away with doing.

They started with the Catholic churches Hospitals, they will continue by reducing charities’ funding, next they will rescind or modify charities’ tax exemptions and finally they will be deemed out side the law entirely due to their inability to conform with mandates from the government.

This is all towards the replacement of any viable support system for the citizen other than the STATE.

Once the citizen must interact with the STATE for all assistance then the citizen can be coerced into STATE approved behavior.

SKYNET never was about a digital/electrico-mechanical artificial intelligence taking over the world. It was about the spider web of GOVERNMENT USING computers to secure it’s hold on all people. It’s a FORM of artificial intelligence and it has a life of it’s own.

Yes. Fundamental leftism. Destroy charity, religion and family. Anything to compete with the State. I think Lenin said something about it.

The religion of STATE, supercedes all. It allows no pretenders.

In the spirit of bipartisan cooperation after our electoral defeat, let me help Champ and Harry Reid raise taxes and in the process make the charities squeal more loudly.

As Mencken said, democracy is the system where people vote for what they want, and then they get it good and hard.

I’d like the charities to get it good and hard, and perhaps learn something. To wit, some modest proposals for tax increases —

1) tax income earned on charitable endowments at the capital gains rate. If a charity wants to reinvest a gift rather than spend it, fine, but they pay the tax on the investment income that results. That’ll educate liberals real quick on what the current capital gains rate is.

2) cap charitable endowments. Above a certain number, make endowments pay a 50% excise tax to the federal government. After all, at some point you (yeah, you, Harvard University, I’m looking at you) have enough money.

3) do away with the tax exemption for charitable organizations that aren’t engaged in actual charity. These various political ‘educational’ organizations are shams and fronts and don’t deserve any special consideration in our tax law. Hospitals are good: exempt them. Women’s shelters are fine: ditto. Educational action funds for climate change can pay the tax and ‘educate’ the masses on their own dime.

4) cap lifetime contributions to charitable causes. Warren Buffett can give away all his money if he wants, but he also has to pay the tax man.

I’m being bipartisan, remember 🙂

    studentofhistory in reply to stevewhitemd. | December 4, 2012 at 7:38 pm

    Don’t forget to also eliminate the Hollywood Tax Deductions and accounting gimmicks, as well as start taxing University staff and faculty for all the perks they get from the Colleges and Universities (just like employees for corporations or the corporations are taxed for those perks), i.e., free tuition for their kids, free membership to state of the art fitness centers, all expense paid trips overseas to useless conferences, sabbaticals, cadillac healthcare programs, etc., etc. Maybe if they feel the pain, at least some will become a little more conservative.

“In Sweden, giving to charity, absurdly, came to be considered a lack of solidarity, since it undermined the need for the welfare state.” – Roland Martinsson

I said it before and I’ll keep saying it. If the president WERE trying to bring down this country, WHAT would he be doing differently?

The Julia thing should have been instructive enough about Big Daddy government. Charities? We can’t have those people actually helping people. Why would they turn to government for help?

During Katrina I donated money to a little charity in Mississippi who are always there at the beginnings of those awful storms with food trucks and water. They go in as soon as the wind slows down enough that they can. It took the government days to get food to the people. Imagine a whole slew of the little guys actually helping people instead of grandstanding. That is Big Daddy’s biggest fear. That the people can do it for themselves. (Thanks, Blanche)!

casualobserver | December 4, 2012 at 4:07 pm

I think the progressive desire to minimize the outreach or ability of private charity goes deeper than just a big government dependency. Given the size and scope of their finances and support, private charities represent a very significant part of the ‘common good’ that the progressives cannot control. Throw in an extra sprinkling of religion, in that religiously affiliated organizations make up a large portion of the private social programs, and it seems obvious to me reducing their influence is a huge win for serious progressives.

Christians, and others who tithe, will continue to give because that’s what they do. On the short list of “Sins Which Cry Out to God for Vengence” is abusing the poor. Alms giving is a cornerstone of Christianity.

But then, President 0bama and his hencemen hate Catholics more than they hate Protestants.

    casualobserver in reply to Milwaukee. | December 4, 2012 at 9:16 pm

    I can’t speak for every single church based or religiously led charity, but many I am familiar with depend on the charity of people completely unaffiliated. The most obvious example would be The Salvation Army, but many much smaller programs are similar in their reliance on the generosity of people, both religious and secular.

This appears to me to be a direct attack on the middle class which the democrats pretend to be protecting.

Lies, innuendo and actual practices indicate persecution if you really want to be truthful.

This looks to be a rough ride for the next four years..

As of November 7, 2012, all my future charitable giving will be limited to St. Jude’s and various animal shelters.

When the cashier at the grocery store asks me to donate to “Feed the Hungry” I tell her that they all voted for Obama to take care of them, so they don’t need us.

    punditius in reply to martak. | December 4, 2012 at 8:48 pm

    My reaction is similar. We are not reducing our giving – we are redirecting it to those charities which are not government supported. A charity which accepts government money doesn’t get ours. They will, however, get a letter from us telling them why.

studentofhistory | December 4, 2012 at 7:46 pm

The first thing that should be eliminated from every conservative’s list of charities is their college or university. There shouldn’t even be a questions as to whether we should stop giving to these institutions. They teach the students nothing but liberal propoganda, suppress free speech, and vote for liberals in numbers equalling 98%. Yet, they live off the very capitalists who they scorn. If you have pledged money to a college or university, cancel the pledge NOW. Don’t try to earmark it for the football program or the College Republicans – they can get around those rules (and liberal courts are supporting them). Just look at what happened to one family whose father funded and endowment for Princeton to train U.S. students to take the civil service exam. Princeton used the money to fund its international center (almost all of the students were non-U.S.) and when the family sued to get the money back or have it used for its original purpose – they lost.

Also, if you have named your college or university alma mater in your will or trust, amend them and let the University or College know that this administration is the reason. Hit them where it hurts and hit them HARD.

It’s the same way with Obama Care. I have said for a long time that Leftists really don’t care if it works or not. They are more interested in destroying the insurance industry, because, once that is accomplished, where are they going to turn? That’s right, the Federal Government.

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