Charities And Tax-Deduction – Moon of Alabama

March 26, 2009

Charities And Tax-Deduction

Obama proposes to limit the tax deductibility of charitable contributions:

The proposed tax change would apply to married couples with incomes of more than $250,000 (and single people with incomes greater than $200,000). Under the law, such couples can deduct the value of their charitable gifts from their taxable income.

…
The administration's plan would limit the amount that high-income individuals could deduct to 28 percent of their gifts, down from 35 percent, even though their incomes would still be taxed at a higher marginal rate.

Obama should go much further.

To give to a charity fulfills the person goal of the donor. The state is about furthering the goals of the general public, not of specific individuals. While some charities support the general good others, like most religion based charities, often have restricted groups of beneficiaries and want to further their special interests and policies. Some charities even work against the general good and against the declared policy of the state.

As David Ignatius points out today:

[C]ritics of Israeli settlements question why American taxpayers are supporting indirectly, through the exempt contributions, a process that the government condemns. A search of IRS records identified 28 U.S. charitable groups that made a total of $33.4 million in tax-exempt contributions to settlements and related organizations between 2004 and 2007.

My general stand on this that if a charity provides for the general good, it should be supported by all taxpayers. If a charity wants to provide for some special interest, giving to it should not be tax-deductible at all. I recognize that this would be difficult to achieve.

But one should ask why some rich people are able to deduct much more from their taxes than poorer ones even make. That gives the rich an advantage in influencing policies in their class interest while the costs are settled on all others.

A democracy is about one-man-one-vote because we believe that all men are equal and should have an equal say in furthering policies. The amount of charity giving that is tax deductible, if one supports such deductibility at all, should therefore be limited to the same amount for everyone.

A decent limit would probably be 10% of the yearly median income per person. In current U.S. numbers that would be some $2,600 per year everyone could give and get some tax deduction for.

Anybody who wants to give more for a favored cause is of course be free to do so. But there is no sound reason for the state to further that by waiving duly owned taxes for some individual and by spreading their foregone tax load on the shoulders of the rest.

Even if he wanted to Obama would not be able to get rid of tax-deductibility for all charitable contributions. But a limit on each individual's amount that can be given and tax-deducted is a sound aim and he should push into that direction.

Posted by b on March 26, 2009 at 16:30 UTC | Permalink

Comments

The principal behind taxation is that the government will be able to allocate resources more appropriately than individuals. So far, the bulk of money appropriated by the U.S. government has been used to feed a military industrial complex and to shield the wealthiest of banksters from the consequences of their actions.
I see no reason to give the government even more money and no reason to assume it will be better spent than before. I submit to you that private charitable contributions, taken as a whole, do more public benefit than the money as it will be spent by the government.

Posted by: Lysander | Mar 26 2009 17:43 utc | 1

Madoff targeted charities. The public is supposed to figure that they were ‘easy suckers’ as they wanted a steady return for the good works…and may have been financially naive.
The real reason is quite different.
Charities (not all, but in the US somewhat common?) don’t spend their money, have little turnover, etc. I believe there is a law in the US that obliges charities to spend 5% of their capital per annum (I may be mistaken, but the very existence of such a rule, if true, speaks volumes..*) – basically they sit there, provide tax relief and kudos for givers, and parties, contacts, spending on junkets, etc. and don’t complain ever about anything, all is OK with them.
They live off donations and don’t give a fig about spending and invest with ‘buddies’ – there are always more marks out there, to pay for planting trees in Israel or whatever.
Some (again, they are not all the same) simply live off their holy reputation while dabbling in an amateurish fashion in what they think is high finance (eg. Madoff.) Many charities are just sucking the teat of providing respectability to fraudsters …Darker interpretations are also possible.
* tried to look it up, didn’t manage.

Posted by: Tangerine | Mar 26 2009 17:47 utc | 2

I have to say, this is the first reasonable proposal from the Obama admin.
Yet, it is quite minor. Niggling around little edges.

Posted by: Tangerine | Mar 26 2009 18:04 utc | 3

peanuts to appeal to the fundies
last I looked, Ireland is so fucked, (correct me anyone if I am wrong)
Total expected revenue in taxes etc 34bn
Social welfare budget alone 21bn
The fuck-up is so incredilious.

Posted by: Cloned Poster | Mar 26 2009 18:07 utc | 4

PS: Charities, they funded Ireland in education big time since until the peado-priest scandal broke, how long to wait for a rabbi-war-crimes scandal to break?

Posted by: Cloned Poster | Mar 26 2009 18:11 utc | 5

The Celtic tiger – not good. New Eastern EU countries, a bit the same.
Ireland has a grave handicap, it is at the end of the energy chain. Up in the North, dependent on the Brits… fill it in.

Posted by: Tangerine | Mar 26 2009 18:13 utc | 6

When my wife and I sold part of our business, we were faced with two choices. We could structure the sale so that we paid about one-third of the gross to the government to pursue its war plans and general boondoggling. Alternatively, we could take about half of the gross and establish a non-profit fund under the umbrella of a foundation to benefit members of our community (in our case, schoolchildren) and essentially pay the government almost nothing.
Although our net with the second alternative was considerably less, the choice for us was obvious. The found should outlive us by many years, whereas the government could spend the funds taken as taxes in an instant and produce no perceptible benefit to the common good.

Posted by: Obelix | Mar 26 2009 23:09 utc | 7

US mil.gov delivers AT BEST 15c on the $1, the rest is burned as “administrative overhead and other undisclosed national security purposes”, meaning, government employee salaries, benefits and outsourced contractors, think tanks, mercenaries.
Charities are by in large con’s in themselves, more than half aren’t even charities they’re non-profit scams by tax avoiders. Many of the well-known “green ____ ” and “save the _____ animal” charities do no better, between 10c to 15c gets delivered.
Basically, every worker has a government gorilla on their backs (sum of taxes ~50% is $1 for you, $1 for mil.gov), and every pair of jockeyed-up worker-gorillas has a banker-broker chimpanzee (credit card fees are $1 of every $3) cracking the whip.
Charities are the happy-up vendors around the perimeter of the pantheon, for those slap-happy, punch-drunk deluded worker-units to pour the rest of their talens into, before the nursing homes get their hooks on ’em, and the bleed lines in their veins.
Before not too long, it will be direct deposit into the Treasury, 33% siphoned off by Fed for Treasury debt, 66% siphoned off by mil.gov, and the 1% for the Arts/H&HR,
stories about rumpelmuffins turned quants spinning string theories into black holes.
From there deficits will explode as moon launch until America’s “Challenger” moment,
and just like Challenger, one bright morning Obama is gonna shout out, “We’re go for power up!”, in the next moment, Geithner will be hissing, “We have an anomaly.”

Posted by: Anonymous | Mar 26 2009 23:23 utc | 8

Joel Stein: Sure, give to charity. Just don’t expect a kickback

The problem with even a 28-cent contribution from the government is that we all then have 28 cents less in tax revenue. Which essentially means I am being forced to give my money to the charity of your choice. And if I’ve learned anything from rich people’s wills, the charity of your choice is either a cat, a stripper or, I’m guessing at least once, a stripper cat.
The charity of your choice, as important as it may be, is not what taxes are for. Taxes are for whatever we all agree is absolutely necessary. Like paying Halliburton to make people in the Mideast hate us more.
By allowing charity deductions, I have to pay more in taxes so you can support causes I didn’t get to approve of through my vote. In 2006, that was $40 billion more we had to pay, according to Congress’ Joint Committee on Taxation.
…
Less than 10% of charity money goes toward basic human needs. That’s because a lot of people contribute to things that also benefit them. Schools get the second- biggest part of charity dollars, which means donations to Harvard, Stanford and Exeter, which is kind of like donating money to money.
…
Meanwhile, people who actually volunteer their time get no tax benefit. And despite what movies have taught them, they never hook up with hot chicks there either.

Posted by: b | Mar 27 2009 12:01 utc | 9

Baby/bathwater folks.
I know many decent and honourable charities.
Some of them are run by religious organizations.
I don’t if the government could directly fund, say,
the Salvation Army.

Posted by: Ael | Mar 29 2009 4:09 utc | 10

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