Give ‘Til it Hurts

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At his March 25 press conference, President Obama answered questions about his plan to drop the charitable deduction of the top 5% of income earners from 39% to 28%. Some people, it seems, have been concerned that this might retard charitable giving. Obama’s response: “Now, if it’s really a charitable contribution, I’m assuming that that shouldn’t be the determining factor as to whether you’re giving that $100 to the homeless shelter down the street.”

Let’s see, I wish to donate $61 of my post-tax wealth to the homeless shelter down the street. Because of my deduction bracket, I give the shelter $100. This costs me $61. With the Obama plan, I still wish to donate $61 of my post-tax wealth to the homeless shelter down the street. But because of my new deduction bracket, I give the shelter only $84.72, so that the gift will still cost me $61.

The change in tax brackets was not “the determining factor” in the amount of my giving. I gave the shelter exactly as much of my wealth, post-tax, as I had done before. I was not, therefore, giving to get the deduction. Yet the shelter is in fact $15.28 less well funded, because of the Obama-induced bracket changes.

Obama is an intelligent man. Surely he can understand arguments as basic as this. Are we really to think that when he says that his tax proposals “shouldn’t be a determining factor” in charitable giving, we should interpret his statement to mean that you should be willing to give even more to compensate for the fact that the government is taxing you more?

No. We should more reasonably assume that, like all other politicians, Obama is disingenuous and rationalizing. Despite pre-election promises, he provides less than hope, and leaves charities with less change than they had before.

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