Wednesday, March 25, 2009

Tax Deductions for Charity

Last night Obama held a press conference during which a reporter asked him about his administration's plans to reduce tax deductions on residential mortgages and contributions to charitable organizations.

I'd like to make two comments about this topic: one about the issue generally, and another about Obama's specific answer to the question.

First, a comment on the more despicable of the two.

Here is a portion of Obama's answer to the reporter:

"In that sense, what it would do is it would equalize -- when I give $100, I'd get the same amount of deduction as when some -- a bus driver who's making $50,000 a year, or $40,000 a year, gives that same $100. Right now, he gets 28 percent -- he gets to write off 28 percent. I get to write off 39 percent. I don't think that's fair..."

This logic is either twisted, or fundamentally dishonest. Because it fails to acknowledge that the reason the wealthy tax payer gets a 39% deduction and the bus driver gets a 28% deduction is because the wealthy tax payer pays a 39% marginal tax rate and the bus driver pays a 28% marginal tax rate. It is only by virtue of a person's paying money to the government that he or she gets a tax deduction!

When I hear someone making an argument like this I honestly want to know what has caused him do so. There can only be a couple of reasons: 1) he's dishonest, and doesn't mind pulling the wool over the eyes of modestly stupid people; or 2) he's modestly stupid himself; or 3) he believes that all money is actually the government's money, so it doesn't matter what marginal tax rates are when contemplating tax deductions; or 4) he's a sadist, and wants to hopelessly complicate the tax code.

In this case, I believe Obama's words were some combination of #1 and #3, with a wee, tiny bit of #2. (I say #2, because I don't think that Obama has ever operated an Excel spreadsheet, so probably has a hard time visualizing things like gross and net). In any event, it makes me sick to my stomach.

But onto the issue itself, because it illuminates another of piece of Obama's mind which has always been blindingly clear to me, but apparently was not to such people as Christopher Buckley or David Brooks.

In a later portion of his answer, Obama said "there's very little evidence that this has a significant impact on charitable giving."

Now, every study I've ever seen concludes the exact opposite. Common sense would conclude the exact opposite. The Executive Director of every 501(c)(3) in this country would probably conclude the exact opposite.

I do not believe for a moment that Obama actually believes what he said. But, it really does not matter. Because Obama really would like it if government expenditures crowded out private donations.

Why would we need privately funded soup kitchens if the government provided soup for everyone? Why would we need privately funded performing arts centers (disclosure: I am on the board of a privately funded performing arts center) if the government, through the NEA, funded all of our performing arts centers? Why would we need any 501 (c)(3) if government provided all the goods and services that these organizations provide?

Well, we wouldn't.

So, what I've concluded is that Obama was dishonest about the issue in furtherance of his ultimate principle: that government is the solution to everyone's problems.

Overwhelmed

It's been a while since I've posted here, but don't think my silence is some indication of contentment. On the contrary, my silence is a combination of two things:

** I've been busy in Korea, China, Vermont and France, and

** The sheer enormity of outrage flowing from the Obama administration has made it hard to know where to start. First came Obama's stimulus package, which I've previously commented on, and then came his inaugural budget, which upped the ante considerably. Obama's disingenuousness in selling both pieces of legislation has been nothing short of historic. Pretending that we need to compensate for the sins of our leveraged, profligate ways by taking on ever more towering leverage in order to provide for ever more profligate spending is something which only someone as silver-tongued as Obama could pull off. The only question is how he does it with a straight face.

And with regard to contentment, the opposite is true. I have settled into a deep and lasting pessimism. I am beginning to feel that the steps that are being taken right now to launch the United States toward a European-style social democracy may well be irreversible. Even if some Ronald Reagan were found in the next eight or ten years, the damage may have been done. The miracle which is the United States may be being lost, right now.

The only person who seems to be taking notice of this deplorable situation is Charles Krauthammer. Regular ole Americans are so distracted by the economic turmoil that they are, in my opinion, largely unaware of what is going on.

Anyway, a couple of things have happened in the last few days which I have a particular experience, or interest, in, so I will be posting on those things. Then, I head to Paris for two weeks, so you may or may not hear from me depending on how it goes.