Charity Begins With Charities (Guest Voice)
Sep 24th, 2009 | 11 responses
WASHINGTON — If the uninsured can’t count on the do-gooders to help them, where else can they turn?
The question arises because certain leaders of the sector of our society devoted to civic endeavors moved this week to block a perfectly reasonable way of raising some money to extend health coverage to those who don’t have it.
At issue is a proposal by a number of senators, including Jay Rockefeller and John Kerry, to put a cap on tax deductions taken by the well-to-do. Their suggestion wouldn’t even unsettle existing deductions, and it is far more limited than a sensible idea along the same lines put forward earlier by President Obama.
With the Bush-era tax cuts set to expire in 2011, the marginal rate on the top income bracket is scheduled to go up from 35 percent to 39.6 percent. This affects only families with taxable incomes of roughly $370,000 a year or more.
To help pay for expanded coverage, the senators are proposing that the itemized deductions taken by those with high incomes be capped where they are now. So beginning in 2011, people in the top bracket who made a charitable contribution would have it offset against taxes by 35 cents on the dollar, not 39.6 cents. People in the next bracket down, $210,000 to $370,000, would still get a bigger deduction than they do now. The plan is estimated to raise about $90 billion over a decade.
At the beginning of the year, Obama proposed limiting the deduction to 28 cents on the dollar, which would have raised more than $300 billion and solved much of the health care financing problem.
But Obama’s idea was shot down, and now, a group of charitable leaders — including representatives from the Council on Foundations, the American Association of Museums and, shockingly, the American Institute for Cancer Research — wants to kill the new proposal, too.
“With so many Americans relying on the charitable sector,” they huffed in a letter released on Monday, “now is simply not the time to jeopardize the charitable gifts that are so important to its strength.”
There’s precious little evidence that this small tax change would dent charitable giving, and there’s also a problem of logic: When the Bush tax cuts went through, these groups did not complain that charitable donors would only be able to deduct 35 cents on the dollar. If that was so awful, these groups had nearly a decade to say something. They were silent. Why are they now screaming that 39.6 cents is a sacrosanct amount?
Far worse is the signal this sends: If even groups whose very mission is public-spirited can’t take an exceedingly modest risk to extend health coverage, how can we expect anybody else to pay a little more for a moral imperative? In fact, it seems that almost every group is resisting almost every proposal that would pay for health care.
Health reform will fail if it includes a mandate that everyone buy insurance but does not provide subsidies large enough to make coverage affordable for Americans in the middle and lower-middle ranges of income. Yes, costs would be held down with a public option, or at least a trigger to bring an alternative government plan into being in markets that lack real competition. But with or without a public option, decent subsidies are essential.
Subsidies cost money — one reason why it’s unfortunate that the president put an artificial ceiling on the cost of a bill at around $900 billion over 10 years.
Nearly everyone forgets a crucial fact: This money will not be added to the deficit. The bills are designed to be self-financing (unlike, say, the Bush tax cuts). The real cost of doing this right is probably closer to the $1.2 trillion price tag in the bipartisan proposal put forward earlier this year by former Sens. Bob Dole, Tom Daschle and Howard Baker. But whatever number Congress finally agrees on, the subsidies have to be sufficient and they have to be paid for.
This means that liberal interest groups need to be open to revenue ideas that are not their first choice, such as some form of taxation on high-end health plans. It also means that moderates claiming deficit hawk credentials cannot pretend that unpleasant tax increases can be avoided by holding down costs at the expense of the uninsured and underinsured.
If anyone should understand this, it’s the leaders of our charities. Perhaps they will be charitable enough to reconsider their position.
This column is copyrighted and licensed to run on TMV in full. (c) 2009, Washington Post Writers Group.
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11 Responses to “Charity Begins With Charities (Guest Voice)”
Charitable contributions should be 100% deductions. Why charge people for giving? If they are taxed less they will likely give more. If you want to help poor people don't tax charity donations..
The entire premise of this argument rests on the prediction of a stable economy….meanwhile every leading expert in economics predicts a rough ride for up to the next 10-20 years.
So the upper income folks can lose their butts overnight depending on what the stock market is doing or not doing. Relying on a shakey and unpredictable income to then at their whim decide to give to [whatever] charity…well *smile* nice try…
How about the upper crust gives to a most noble charity via a mandate? They shouldn't object since they're all about charity right? *snicker* The welfare of the health status of their fellow citizens… Now there's a charitable drive I can get behind..lol…
Oh I'm so tired of hearing about how tough it is on the so called over-taxed rich. Tax the hell out of them we need healthcare!
Maybe then these supposedly “superior” people will use their supposedly superior talents to find a way to lower healthcare costs down to where the rest of the world is paying for healthcare.
Start with Doctors.
I never quite understand this issue. After a certain income level they start phasing out your deductions anyway, and if that doesn't get you then the AMT will. Who are these people getting the full 39.4% deduction on charitable donations?
That's because the Dems don't want you to understand.
You are absolutely correct. Itemized deductions start phasing out at 160K, so you don't even get the full marginal rate benefit of contributions in the 28% bracket, much less 35%.
You confuse charity which is voluntary with theft.
Considering that the top 1% currently pays more income taxes than the bottom 95% I think you already have that. They are the principle funders of all those State benefits that are received.
wow. Leonidas, I see I have credited you with considerably more intelligence or knowledge than you have. Now I feel foolish for debating with you at all. So pointless as this probably is, I'll provide a little primer on taxes. When someone pays 35% tax on their income and gets 35% deduction for what they donate to charity, that IS 100% deduction, they DO get a 100% deduction for the tax they owe. If we made that 100%, the taxpayer would be matching their donations 65:35. By your reckoning, taxpayers should donate almost twice as much as any rich citizen to their favorite charity, which could be their own. For example, for every 35 million Gates gives to the Gates Foundation, we would be obligated to kick in 65 million.
Man, educate yourself. That really shows a fundamental misunderstanding of tax policy.
Totally off base Greendreams.
My point is that any income donated to charities should not be taxed at all. No tax, nada, ZILCHO. 100% tax free. Income should be calculated for tax purposes after charitable donations are taken out.
Taking your 35% example. If you pay 35% in taxes and get a 35% deduction on charitable contributions you are still paying taxes on 65% of your contribution. If that tax is eliminated the individual will have more money in their pocket. Given that they were willing to give a percentage of their own money to charity, it stands to reason that a similar percentage of the extra money that they would have by not paying taxes on that 65% would also go toward charity. In fact, knowing it would be not taxed at all, they would be more likely to donate an even greater amount than that.
As for myself, here is how I address income. There are 3 piles. The first pile is my expenses, Food, transportation, clothing, taxes etc. After that is taken out I go to the second pile which is savings and investment and I put in what meets my goal as best possible allowing for some minimal amount going into the third pile. The third pile is charity. Now if after finishing the allocation to the first pile (which wont change due to any adjustment of charity tax policy), if I have more money left due to lower taxation then at least one of the other two piles will grow. If the second pile has already reached its goal only the third pile, ie charitable contributions will grow. If the second pile has not reached its goal then either it or it and the third pile will grow. Both of these will help the poor and disadvantaged one, the third pile, directly, the other the second pile indirectly by reducing the cost of capital to business which facilitates expansion and more hiring and higher wages.
I have no fundamental misunderstanding of tax policy, I worked in the field for a time, you simply have a fundamental misunderstanding of what I was saying. Perhpas I didn't express it clearly enough previously, but now I most certainly have.
There's a moral and what should be an implicit legal limit to every form of tax, at fifty per cent. More than that is a form of slavery. What it says about collectivist (and other disturbing) tendencies of those who want higher fractions than fifty per cent is not flattering.
As usual, I read and understand more about what the lefties want, than they know themselves, but I can't help it here.
Charity under a mandate, eh, Sil? Just like mandatory “volunteerism” or “being asked to contribute” to ClintonCare back in the early 1990s? [chuckle]
Why stop there? Why not try a wealth tax, federal money for “Responsible Wealth,” and while we're at it, whatever we don't manage to federalize, we find another way to ensure that people who vote with their feet against bad policy in one state by going to another have to pay for the “privilege.”
Somehow I doubt even the most febrile Obamaniacs would be able to pull much of this off…
[Wolff is the author of a book on the wealth tax.]
http://bostonreview.net/BR21.1/wolff.html
“Tax the net worth of the very richest Americans on a regular basis during their lifetime.”
http://www.prospect.org/cs/articles?article=a_b…
http://ag.ca.gov/cms_attachments/initiatives/pd…
“The abolitionists pushed Lincoln.
The labor movement pushed Roosevelt.
The civil rights movement pushed Johnson.
Help us push Obama.”
http://www.faireconomy.org/issues/responsible_w…
“… some of these descendants of George McGovern are agitating for another idea to narrow the gap between haves and have-nots. It's called a maximum wage …”
http://www.nytimes.com/1996/06/16/weekinreview/…
“The Great Depression gave us the minimum wage. Might we now see a “maximum wage,” thanks to the Great Recession?” [Pizzigati, author of a book on the "maximum wage"]
http://www.ourfuture.org/blog-entry/2009083423/…
“Having a federal minimum wage helps a little in spreading more economic justice. But the more important question in these terrible economic times is this: Should we have a maximum wage law?”
http://www.associatedcontent.com/article/132274…
“Considering that the top 1% currently pays more income taxes than the bottom 95%”
Not to sound “lefty”, but that's not a good sign. In a freer world, the middle class should have most of the wealth. What's worse, I'm now reading the top .01% or so, are paying much lower taxes than the top 1%. In other words, it's not so much the rich that are getting the tax breaks, but the ultra-rich.
'Gotta keep thing interesting around here.