By G. Oliver Parsons
The Obama Administration’s $3.6 trillion 2010 Federal tax-and-spend budget is stingy with generous charity donors. In fact, it contains a tax penalty for those donors who give 44 percent–$81 billion–of all annual charitable contributions.
Under the planned budget the top five percent of taxpayers, who currently get a $350 tax saving for each $1000 they donate to charity, will see their savings reduced by 20 percent, to $280. Consequently, tax preparers will be advising clients who give the most to charities to contribute less to offset this tax increase. It is estimated that the draft budget will result in a 10 percent drop–$8 billion–in annual charitable giving by these individuals.
The double-edged irony of all ironies is that, while President Obama is imposing this “sin tax” on charity, the Government’s notoriously inefficient welfare bureaucracies will be forced to make up the shortfall, resulting in increased government expenditures. In the mid-to-long run taxpayers will be hit with even more taxes. In the short run these bureaucracies will be unable to cope with this flood of new demands, and they will be thrown into a chaos that will serve no one.
The tax penalty on charity giving will come at the worst time for the poor and for charities that provide for them. This recession–the most severe in 75 years–is taking a large bite out of charity giving, with large gifts already falling by a third. This, just as the poor are becoming more numerous, and their needs greater. Thus, Obama’s policy is disastrous for the poor and for charities alike.
Charity organizations fear that Obama’s tax increase will aggravate the repercussions of the recession by causing wealthy donors to give less still. Charitable victims will include Churches, health research institutions, hospitals, soup kitchens and private international relief organizations. Some smaller charities will shut down outright, and once their offices and warehouses are closed, and their employees are let go, they will find it difficult to ramp up again.
Charitable organizations are in an uproar over the Obama tax increase proposal. They had been urging the Administration to increase—not lower—incentives for giving during the recession, correctly reasoning that tax incentives stimulate charitable giving. Among the charities opposing the Obama plan are Independent Sector, representing 600 charities; the Council on Foundations, which lobbies on behalf of charities; the Indiana-based Center on Philanthropy; the Association of Healthcare Philanthropy; the Union of Orthodox Jewish Congregations of America; the United Jewish Appeal; and the United Jewish Communities, which represents many Jewish charities.
So why is Obama doing this? His Administration says that it will use the tax money to expand “health care.” According to this pseudo-logic, health care will have to contract, so as to expand! That is, hospital care, for example, will contract as private charity funds from wealthy donors dry up, and then will expand, as new tax money from these same individuals would be provided. On the surface, after some initial dislocations, the ultimate result would be neutral. Not a chance! The result will be anything but neutral, for four reasons.
First, the Obama Administration will re-prioritize charity activities from what the private sector wants to do, to what liberal government wants to do. For example, we can expect this money to fund abortion and partial-birth abortion.
Second, Obama’s plan will increase public welfare, thus keeping the poor dependent on government in general, and on the Democratic Party—the party of welfare—specifically.
Third, once private charities are thus reduced in size, weakened and demoralized, liberal government will find it easier to control them—to redirect their remaining efforts to support government welfare policies–through governance and grant making. Charities will be forced to show a “public benefit”—perceived through the special lens of liberal government—for what they do to qualify for government grants and tax benefits.
Fourth, charity organizations will be subverted from within, through the liberals’ favorite mechanism of Affirmative Action. Affirmative Action—a tactic for increasing the number of liberals in key positions throughout organized society–started in the late 1960’s, and has steadily acquired momentum. It is now advancing at a gallop. Political pressure will increase on charities to step up the “diversity”—read quotas for liberal elites within preferred racial, ethnic and sexual groups—of their employees and even of the recipients of their charity. This will be nothing less than a shakedown of charitable organizations for the exclusive benefit of liberal elites within preferred minorities and their constituencies. It will further discourage private giving, as potential donors will object to charitable organizations becoming extensions of liberal government. Lastly, Obama’s initiative on charity giving, if it becomes law, will give added impetus to current efforts in several liberal states and in the US Congress to require foundations to report the race and sex of their managers and employees.
Fortunately, Republicans—not least our own Representative Virginia Foxx—are uniformly opposing Obama’s proposal to increase the tax on charitable deductions. Thus, its passage into law is not assured.