The President’s Tax Proposal Would Cripple Charities

President Obama proposed once again that Congress reduce the federal itemized tax deduction for charitable contributions. He argues that people don’t give to charity to get a tax deduction and increased revenue could pay for other things (in the latest instance, his Jobs Act).

“I’m assuming that that shouldn’t be a determining factor as to whether you’re giving that $100 to the homeless shelter down the street,” the president said in 2009.

A tax deduction is not the motivating factor for most people who give. But lower taxes are an empowering factor. How much you give has a lot to do with how much you can give. Charitable giving is discretionary. If you pay more in taxes, it stands to reason that that money will be made up somewhere else in your budget.

Brian Gallagher, president of United Way Worldwide, notes that Obama’s proposal would reduce charitable giving by $2.9 to $5.6 billion per year, according to one study.

“That equates to eliminating all of the private donations each year to the Red Cross, Goodwill, the YMCA, Habitat for Humanity, the Boys and Girls Clubs, Catholic Charities, and the American Cancer Society combined,” Gallagher said.

State budgets for social services and safety nets are stretched, charities are struggling, and needs are increasing. The Senate was wise to reject using the charitable tax deduction as a chance to raise taxes on Americans who are voluntarily and generously stepping up to meet those needs during a recession.


Kathryn Hickok is Publications Director at Cascade Policy Institute, Oregon’s free market public policy research organization. (Disclosure: Cascade Policy Institute is a charitable corporation that benefits from donors being able to deduct their contributions.)

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Posted by at 05:00 | Posted in Federal Budget, Government Regulation, Individual Responsiblity, Taxes | Tagged , , | 54 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Bob Clark

    Reminds me of the saying:  “Don’t steal.  The government doesn’t like the competition.”

    You see for government private charity is competition.  The government has largely usurped the function of private charity, and expanded its franchise.  The government franchise is hard up after the last decade of over spending and binge borrowing, and now looks to snuff out the last few remaining vestages of private charity.  For some reason, our mainstream churches just roll over and let government take over one of their most highly valuable functions (providing care with a dose of intervention).  Churches have become more a ward of the state, acting now as mouth pieces for the welfare functions of government.

    The other thing presently of keen interest is the tug of war being waged nationally between progressive taxation and what I would call equal taxation.  A non welfare state (one which is concentrated on competitiveness, efficiency and growing the “economic pie”) favors equal taxation (the flat tax, for instance, or the nine-nine-nine); whereas a welfare state is more aligned with the existing or a more accentuated income tax rate schedule.  This is a key split between the Tea Party on the right and the Occupy XXXrs on the left.  It’s difficult to see the flat tax actually getting through the political process. The right needs to realize income distribution is increasingly skewed (you are either Tom Brady making the big bucks year and year out, or your the one year flash in the pan quarterback (Teabow) if that), and to now ask the country to give up a long tradition of progressive taxation is an extraordinary leap of faith.  I believe in treating everyone equal (flat tax rates), but its just not politically feasible.

    Competitivenes on the right (Tea Party) versus Welfare State on the left (Occupy XXXrs).  We are divided, making the 2012 elections an historic political battle.  We on the right need to bring it in ’12.  No doubt about it.

  • Anonymous

    Increasingly we live in a nanny state and that’s pretty much the way Obozo wants it. If you undo the charities what does that leave? Why, the big old government. What else?

    Why should we have a choice of which charity we support? Just turn it over to government, increase taxes, done deal.

  • Founding Fathers

    You do realize, don’t you, that it was under Ronald Reagan that non-itemizers could no longer deduct charitable deductions.

    Did any of you right-wingers express outrage then?

    • Rupert in Springfield

      So basically you are arguing that if Ronald Reagan did it, it was the right thing to do. Interesting strategy.

      • valley person

        His question was whether when Reagan did it, you objected. 

        • Rupert in Springfield

          I know what his question was, however whether or not it is the right thing to do has zero to do with whether or not anyone objected then. That leaves us with two options:

          A) FF is raising a staw man argument by trying to divert discussion to debate of Reagan’s policies rather than Obama’s.

          B) FF is making the argument that if Reagan did something, that justifies Obama doing a related thing.

          I went with option B because frankly I am getting tired of the endless dumb strategy of option A. I mean it never works. Anyone can simply point out we are talking about policy now, not 30 years ago and you have instantly lost. 

          You guys need to read the bumper sticker “Question Authority”. I mean you never do. If it is a policy from a Democrat you will defend it unquestioningly. You are utterly incapable of criticizing your leaders in a straightforward fashion. It’s the kind of brain dead obedience that Orwell warned about. This is frankly why liberals tend to scare the crap out of people if they ever get any power. Thank God your prediction of 40 years of Democrat rule didn’t work out so well. 

          Look – Just say it – it isn’t hard. Obama is wrong for trying to get rid of charitable deductions and it will probably hurt charities.

          You know it, I know it, and trying to dodge the issue with Reagan this Reagan that doesn’t convince anyone of anything other than you guys are a little out there in your unquestioning obedience.

          • valley person

            Or

            C) FF was trying to find out if opposition to Obama’s proposal is simply a reflex reaction on your part rather than a considered opinion on a policy.  

            I never question authority? You don’t know me very well Rupert. I’ve been doing that since the age of 12. Its gotten me into a heap of trouble over the years. I post here on Catalyst in large part to question a self presumed “authority.”

            On this issue here, I disagree with you. First, Obama is not “getting rid of” charitable contributions. He is proposing to limit the ability to deduct for them to the rate that existed under Reagan (28%), not eliminate the deduction altogether. Second, the impact on charitable giving is projected to be small, 1-2% a year. Third, you may have missed this but the US government is running trillion dollar deficits. So curtailing some tax breaks is necessary.

            Symphonies and museums and right wing think tanks will just have to work a bit harder.

          • valley person

            Or

            C) FF was trying to find out if opposition to Obama’s proposal is simply a reflex reaction on your part rather than a considered opinion on a policy.  

            I never question authority? You don’t know me very well Rupert. I’ve been doing that since the age of 12. Its gotten me into a heap of trouble over the years. I post here on Catalyst in large part to question a self presumed “authority.”

            On this issue here, I disagree with you. First, Obama is not “getting rid of” charitable contributions. He is proposing to limit the ability to deduct for them to the rate that existed under Reagan (28%), not eliminate the deduction altogether. Second, the impact on charitable giving is projected to be small, 1-2% a year. Third, you may have missed this but the US government is running trillion dollar deficits. So curtailing some tax breaks is necessary.

            Symphonies and museums and right wing think tanks will just have to work a bit harder.

          • 3H

            Perhaps Rupert should consider thinking a little bit before he posts.

          • Bite It Loser Boy

            Perhaps you should stop acting like a LIB retard 24/7/365.

          • 3H

            Perhaps Rupert should consider thinking a little bit before he posts.

        • Rupert in Springfield

          I know what his question was, however whether or not it is the right thing to do has zero to do with whether or not anyone objected then. That leaves us with two options:

          A) FF is raising a staw man argument by trying to divert discussion to debate of Reagan’s policies rather than Obama’s.

          B) FF is making the argument that if Reagan did something, that justifies Obama doing a related thing.

          I went with option B because frankly I am getting tired of the endless dumb strategy of option A. I mean it never works. Anyone can simply point out we are talking about policy now, not 30 years ago and you have instantly lost. 

          You guys need to read the bumper sticker “Question Authority”. I mean you never do. If it is a policy from a Democrat you will defend it unquestioningly. You are utterly incapable of criticizing your leaders in a straightforward fashion. It’s the kind of brain dead obedience that Orwell warned about. This is frankly why liberals tend to scare the crap out of people if they ever get any power. Thank God your prediction of 40 years of Democrat rule didn’t work out so well. 

          Look – Just say it – it isn’t hard. Obama is wrong for trying to get rid of charitable deductions and it will probably hurt charities.

          You know it, I know it, and trying to dodge the issue with Reagan this Reagan that doesn’t convince anyone of anything other than you guys are a little out there in your unquestioning obedience.

    • Rupert in Springfield

      So basically you are arguing that if Ronald Reagan did it, it was the right thing to do. Interesting strategy.

  • JSSmith

    One of the problems with our tax code is its complex maze of deductions and credits.  Therse are all there to reward some behavior or benefit some group.  If the tax code were simplier, people would spend less time and money trying to avoid taxes, and the process would be fairer.

    Although the intention of this proposal – taking still more money to fund bloated and dysfunctional government spending – is offensive, let’s not throw the baby out with the bathwater.  A fair tax system will eliminate all deductions and credits, giving people more money in their pockets and less hassle dealing with taxes and fees.

  • JSSmith

    One of the problems with our tax code is its complex maze of deductions and credits.  Therse are all there to reward some behavior or benefit some group.  If the tax code were simplier, people would spend less time and money trying to avoid taxes, and the process would be fairer.

    Although the intention of this proposal – taking still more money to fund bloated and dysfunctional government spending – is offensive, let’s not throw the baby out with the bathwater.  A fair tax system will eliminate all deductions and credits, giving people more money in their pockets and less hassle dealing with taxes and fees.

  • Bosstweed

    Who needs charity if we have Obama and his stash????

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