President Obama plans on limiting the tax break for charity deductions to 28%, penalizes those in the 33%, 35%, and soon to be 40% federal income tax brackets. Since the overwhelming majority of charitable contributions come from households, and the overwhelming absolute dollar amount comes from those in the highest tax brackets, one can deduce charitable contributions at the margin will go down in 2011 and beyond. Given this logical conclusion, why are Democrats and President Obama against helping others through monetary means?
Currently, if you are in the 25% tax bracket, you can save 25% in taxes due to your charitable contributions i.e. donate $10,000, save $2,500 off your tax bill. Meanwhile, there is equality among those who pay the highest taxes at 35%. 35% tax payers can equally save 35% in taxes from their donations. So far, so good.
Due to massive government pork spending it’s egregious that politicians now want to not only raise the highest marginal tax bracket from 35% to 40%, but also cut tax breaks on charitable contributions down to 28%! That’s two slaps in the faces of hard working Americans and a punch in the gut for those who need the most help.
The essence of charity is to help someone selflessly. I should hope people’s main purpose of giving is not for tax breaks. It’s kind of like going to the outlet mall where people go crazy buying more to save more. It makes no sense, but then again, a lot of people don’t make a lot of sense. So for starters, we are in agreement that most people give out of the goodness of their hearts.
Since some people do ascribe to the buy more, save more mentality, we can conclude there are also people who enjoy giving more to save more on taxes, which is not as crazy at all. The biggest risk for introducing asymmetric tax breaks is the tremendous backlash the wealthy will have against the government. Out of principle, there will be people who will simply refuse to donate at all because of the discrimination they face from the government. This is a very real worry which is starting to permeate already.
GIVE PEOPLE THE POWER TO HELP THEMSELVES
The Democrats are like women who love going out with bad boys just so they can try and fix them. They try to fix the unfix-able because for some reason, these women believe they are holier than these “troubled souls.” Despite getting burned time and time again, they continue to try and change people by expending a tremendous amount of wasted time. Wake up. Some guys don’t want to be helped, so stop forcing yourself on them!
“Care Not Cash” here in San Francisco is one such initiative where we’ve probably sunk more money into the program to try and fix homelessness, rather than just promote ways for the homeless to find jobs to make money for themselves. One organization, called “Street Beat” does exactly that. They’ve created a self-funding newspaper written and produced by the homeless themselves. Those who want to get involved go to HQ and pick out a bundle of the latest edition. The homeless then try and sell each paper for $1 dollar to passerbys, creating a win-win situation for everyone.
Instead of encouraging those with money to donate to organizations who specialize in helping others in various capacities, the government believes they are more efficient in helping the masses through their own government works programs. Clearly, there is a fundamental difference in how a large portion of the population sees things. Are you better at spending your own money, or is someone else better at spending your money for you?
$6 BILLION GO BYE-BYE
Roughly $300 billion of charitable contributions happen each year. It’s estimated that with the enactment of this asymmetric policy against high income earners, there will be a decline of roughly 2%, or $6 billion in charitable contributions per annum. 2% sounds quite conservative, but regardless of the amount, there will be a decline in charity exactly during a time when charities need the money the most!
On the flip side, the government estimates it will collect an extra $30 billion dollars a year to help fund the $1 trillion+ in deficit spending over the coming decade. Riiiight. Deficit spending is just going from bad to less bad. I happily estimate that $20 billion of that money will be used to line the pockets of corrupt politicians and corporations, $5 billion will be used on projects which won’t get finished, while another $5 billion will be used to buy $100 thumbtacks and $500 staplers!
Massive deficit spending is clearly wrong because it puts a back-breaking burden on our children and financial system in general. Eventually we have to pay back our debt. In the meantime, we are held hostage by foreigners. If we had no debt, we wouldn’t have to keep on announcing discriminatory practices against certain hard working citizens.
It’s so easy to say, “Well, if they’re rich, they can afford it,” when you’re a student or average income earner. But if you were a recipient of charitable services or donations, the last thing you want is for the rich to be punished more. It’s not OK to punish people and make a new set of standards just because someone is rich.
What I fear is a massive backlash from the rich, who are the main contributors of charities in the first place. Clearly there will be a net decrease in charitable givings at the margin, so why is it that politicians are so against helping the poor and organizations who specialize in helping others? The poor have already suffered enough, let’s not make them suffer some more.
Readers, why do you think President Obama is against helping the poor, but so pro helping the middle class? Do you think it’s because the middle class are the majority of America and therefore are the majority of votes?
Do you think it’s right or fair to impose different standards on giving for wealthy Americans, even though they account for the majority of all givings?
Why not encourage wealthy Americans to give more by increasing the tax breaks?
Sam @ Financial Samurai – “Slicing Through Money’s Mysteries”