From Harvard Economist, Martin Feldstein:

Quote :

"President Obama's proposal to limit the tax deductibility of charitable contributions would effectively transfer more than $7 billion a year from the nation's charitable institutions to the federal government. But the high-income taxpayers affected by the rule change are likely to cut their charitable giving by as much as the increase in their tax bills, which would, ironically, leave their remaining income and personal consumption unchanged. In effect, the change would be a tax on the charities, reducing their receipts by a dollar for every dollar of extra revenue the government collects. It is hard to imagine a rationale for taxing schools, hospitals, medical research budgets and arts organizations in this way. I suspect that the administration officials who drafted this proposal did not understand that it would have this perverse effect. 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 current law, such couples can deduct the value of their charitable gifts from their taxable income. While no one makes a charitable contribution to get a tax deduction, the deductibility of charitable gifts reduces the cost of giving and therefore increases the amount that individuals give. ad_icon Consider: A high-income person paying taxes at a 35 percent marginal rate lowers his tax bill by 35 cents for every dollar that he contributes to a charitable organization. The net cost to the individual is 65 cents for every dollar received by the charity. A substantial body of economic research shows that, on average, each 10 percent reduction in the cost of giving raises the amount that a person gives by about 10 percent. So, the 35 percent reduction implied by current deductibility rules raises the amount of charitable giving by about 35 percent. 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. This raises the cost per dollar of giving from 65 cents to 72 cents, an increase of 10.8 percent that can be expected to reduce the total giving of these donors by about 10 percent. What would this mean in practice? Suppose someone would give $10,000 to a university if that amount were deductible at 35 percent. That deduction would reduce the individual's tax bill by $3,500. Limiting the deduction to 28 percent would lower the individual's tax saving on a $10,000 gift to $2,800. This is where things get interesting: If the 10 percent increase in the cost of giving caused the person to reduce his gift by 10 percent, to $9,000, his tax savings would be 28 percent of $9,000, or $2,520. The government's revenue loss would be reduced by $980 (from $3,500 to $2,520). The person's gift to the university would be reduced by $1,000, almost the same amount. Since this high-income person would pay $980 more in taxes but give away $1,000 less, he would end up with an extra $20 for personal consumption. This is a hypothetical example, but the responsiveness of giving and tax revenue reflects the evidence regarding how people respond to changes in tax rates. The congressional Joint Committee on Taxation estimated that in 2007 the charitable deductions of those with incomes over $200,000 reduced government revenue by some $23 billion. If the 28 percent limit had been in effect that year, the $23 billion would have been cut by about $6.5 billion, and charitable giving would have been reduced by an approximately equal amount. By 2011, the year in which the Obama administration proposes to start the new tax rule, the projected decrease in giving would surpass $7 billion. With the endowments of charitable institutions sharply reduced by the fall in stock prices, this loss of gifts would make an already bad situation worse. Many tax features of the Obama budget should be changed to stimulate the near-term recovery of demand and to strengthen long-term incentives for productivity and growth. But the proposed tax on charitable gifts hits at the foundation of our pluralistic society. The administration should recognize its mistake and withdraw this proposal. The writer, an economics professor at Harvard University, is president emeritus of the National Bureau of Economic Research. "

This seems like an irresponsible way to raise revenue. It's sad that Obama, despite all his "line-by-line" campaign talk, rarely thinks about the spending side of the equation.http://www.washingtonpost.com/wp-dyn/content/article/2009/03/24/AR2009032402462.html

[Edited on March 25, 2009 at 8:03 PM. Reason : .]

3/25/2009 8:01:51 PM

Quote :

"This is a hypothetical example"

fantastic!

3/25/2009 8:05:11 PM

^ What's you're point? Why would the notion of a hypothetical example negate the premise?

[Edited on March 25, 2009 at 8:11 PM. Reason : .]

3/25/2009 8:10:37 PM

no point, really.

i'd like to have more faith in mankind though. i mean, if the sole reason people donate is because of tax incentives then baby jesus must be weeping.

3/25/2009 8:12:36 PM

Can't this shit be contained to one thread?

3/25/2009 8:50:33 PM

no, it has to be spread out so it gives the appearance that more people are in favor of this line of thinking.
you know, that 1) wealthy people have no motivation to be productive if the gov't comes and just takes 39% of their money away, and 2) wealthy people really are generous to less fortunate people, as long as it benefits themselves as well.

3/25/2009 8:55:07 PM

^^ Different topics.

Would you like to respond to the merits of the Charity tax or do you prefer to deflect from having a rational discussion given the topic is inconsistent with your priors?

[Edited on March 25, 2009 at 8:58 PM. Reason : .]

3/25/2009 8:55:37 PM

Taxing an action will give you less of that action. This act will reduce the traditonal American urge to give. Why would Obama want people to give less to charity?

If the private charity system breaks down, won't people look to gov't to fill the gap? And once the state is in charge of charities, it gets to choose who is worthy of federal charity dollars.

3/25/2009 9:35:41 PM

Quote :

"wealthy people really are generous to less fortunate people, as long as it benefits themselves as well."

Please. No one is generous unless they get some sort of benefit out of it. Whether its monetary, happy fluffy feelings, or because they just get a stiffy helping old ladies across the street, no does it if they don't get something out of it.

3/25/2009 11:51:46 PM

This is retarted; I do not agree with Mr. Obama on this topic.

The problem is so much of the populist voice is ignorant on how giving to charity works as a tax deduction.
At work I overheard some co-workers complaining how it is not fair that the rich get a XX % deduction and that they
only get a YY % deduction. This is not quite how it works. Charity donations comes out of your net income. If your charity donation
keeps you in the 33% tax bracket than each $1 gives you 33 cents in taxes. If you donations and other deductions come quite large it is possible
the donation will start regressing into the lower tax brackets of 25% and 20%.

This is completely neglecting the fact that every american gets a "free" standard deduction regardless of rather or not they donate to charity.
So essentially the lower middle and working classes get a tax break as if they had donated (for a single person) $5700.

For those itemizing above their standard deduction they get to file for tax dollors over this standard amount.

3/26/2009 9:38:58 AM

Quote :

" i'd like to have more faith in mankind though. i mean, if the sole reason people donate is because of tax incentives then baby jesus must be weeping."

The question is not whether they will still donate to charity, the question is whether they will donate as much as they otherwise would. It is the edge case where you have already donated $10 million to charity, but are unsure if you want to donate yet another $1 million, and the 10% lower deduction rate can put you over the edge to saying "no."

3/26/2009 9:46:42 AM

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"Please. No one is generous unless they get some sort of benefit out of it."

I don't get any happy fluffy feelings when I help people, at least not always. Nothing about donating to the world wildlife fund, which I do every month, makes me feel good, really.

Sometimes I do it because it's necessary.

I think you're projecting.

[Edited on March 26, 2009 at 10:43 AM. Reason : ,]

3/26/2009 10:43:01 AM

Why would Obama want to screw up the private charity system?

Perhaps to install his own state-run charity system.

HR 1388, the “Serve America Act” might be a first step. The bill which is winding its way through congress would add another $5 billion to the budget and would create a new beuracracy which would effectively force children to participate in gov't-approved charity activities as part of their public education.

3/26/2009 10:55:11 AM

1.) It's called the GIVE (Generations Invigorating Volunteerism and Education ) Act, and it passed with bipartisan support, because it's not some ridiculous fascist nonsense as you all make it out to be.
2.) It's 100% untrue that it would force anyone to do anything

Quote :

"The Generations Invigorating Volunteerism and Education (GIVE) Act would dramatically increase funding for AmeriCorps and other volunteer programs, including those for seniors and veterans. It also establishes a goal of expanding from 75,000 government-supported volunteers to 250,000, and would increase education funding and establish a summer service program for students, paying $500 (which would be applied to college costs) to high-school and middle-school student who participate. In its current form, the legislation does not include a mandate requiring service"

http://www.opencongress.org/bill/111-h1388/show

3.) He doesn't want to "screw up" the charity system. It very clearly says this is a hypothetical idea, AND it wouldn't screw up the system anyway. God, you make me nuts.

[Edited on March 26, 2009 at 11:00 AM. Reason : .]

3/26/2009 10:59:26 AM

Quote :

"He doesn't want to "screw up" the charity system. It very clearly says this is a hypothetical idea, AND it wouldn't screw up the system anyway. God, you make me nuts."

3/26/2009 11:23:00 AM

section 6104 which was struck stated ..."(6) Whether a workable, fair, and reasonable mandatory service requirement for all able young people could be developed..."

Granted it was removed, but the point is Obama wants mandatory service from kids for gov't approved "charity" activities. As with all bills, you should look at how it can be twisted and changed in future moves...and it would be fairly easy to re-insert the mandatory requirement in future sessions.

and Section 120b3b of the "Youth Engagement Zones states:
"service-learning is a mandatory part of the curriculum in all of the secondary schools served by the local educational agency."

That sure sounds like forced participation to me. And "service-learning" has an Orwellian tone to it, doesn't it?

The language in this bill is pretty vague which is always a worrisome thing. Another questions is if our country is having such financial problems, why are we spending more money we haven't got on this?

3/26/2009 11:29:31 AM

Since we'll still be paying on the bailouts, etc, in 2011, its possible you could consider this a direct transfer from charities to banks, bonus payments, etc.

yay unintended consequences.

3/26/2009 11:58:12 AM

Just like how i think the problem with Bush is the morons and neo-cons around him; I think to Obama also has an issue of to many of his liberal buddies trying to push their ideas around.

3/26/2009 12:09:34 PM

Quote :

" Nothing about donating to the world wildlife fund, which I do every month, makes me feel good, really. Sometimes I do it because it's necessary. "

Why do you feel donating to the WWF is necessary? Are you saying that what the WWF does in no way shape or form provides you with any benefit? Do you donate to charities that are to your detriment?

3/26/2009 9:00:52 PM

Quote :

"Taxing an action will give you less of that action. This act will reduce the traditonal American urge to give. Why would Obama want people to give less to charity? If the private charity system breaks down, won't people look to gov't to fill the gap? And once the state is in charge of charities, it gets to choose who is worthy of federal charity dollars."

Ding! Ding! Ding! We have a winner!

3/26/2009 9:34:03 PM

Quote :

"Ding! Ding! Ding! We have a winnergnut!"

[Edited on March 26, 2009 at 9:39 PM. Reason : .]

3/26/2009 9:38:59 PM

So, allow me to understand the argument here.

Proponents are arguing, absent evidence, that lowering the deduction on charitable giving for the highest marginal tax bracket will have no effect on charitable giving. None whatsoever. It's crazy to even think otherwise.

So then... why not just eliminate that deduction entirely? Why, those rich bastards are using it to circumvent paying their taxes, after all!

3/26/2009 10:03:23 PM

Quote :

"that lowering the deduction on charitable "

doing so is actually complicating the tax code as the deduction you get is not some special calculation. The donation merely comes out your taxable income; that is if you have more than $5700 which is the standard deduction everyone gets.

Why not just get rid of the standard deduction if want to talk about unfairness. Alexander a liberal hippy douche living in seattle working as a cashier at a CD store; gets 25% of $5700 even if he does not donate one penny to charity and/or has no other deductions. Yet he wants to bitch about altruistic socialites who receive 33% tax break on a $400,000 dontation they give to their alma mater, which is just subtracted from their income.

3/27/2009 11:37:48 AM

rich people donate to their own charity for tax write offs - doesn't really make since they transfer their money to themselves and then spend it

3/28/2009 10:48:39 AM

^ yeah, but they call them "foundations", not "charities"
so.... anyone making over $1M/year or whatever just makes a foundation in their name and funnels money into it

3/28/2009 11:06:15 AM

Quote :

"rich people donate to their own charity for tax write offs - doesn't really make since they transfer their money to themselves and then spend it"

what doesn't make sense?

They donate to a charity - who cares how the charity is distributed or what name the foundation is under. It's still a charity and they should still get a tax deduction for it. Are you two claiming evil rich people start their own bogus charitable foundations and use that money for their own benefit under the guise of charitable contributions?

3/28/2009 11:19:11 AM

Quote :

"Are you two claiming evil rich people start their own bogus charitable foundations and use that money for their own benefit under the guise of charitable contributions?"

uhhh..... are you claiming they don't?

nobody is saying all wealthy people do this, or even that most of the foundations set up by wealthy people are for this purpose. But it's a well-known loophole for unscrupulous people who wish to take advantage of it

3/28/2009 11:23:41 AM

Quote :

"anyone making over $1M/year "

Quote :

"nobody is saying all wealthy people do this, or even that most of the foundations set up by wealthy people are for this purpose."

which is it?

And it looks like you have a problem with liars, thiefs, cheaters... and who doesn't? Nobody's defending rich people's right to do whatever the hell they want. But why should you punish everybody who wants to start a foundation just because some people take advantage of it for their own benefit?

3/28/2009 11:30:14 AM

$1M was just a number. it doesn't mean anything.

Who said anything about stopping people's right to start a foundation?
All I implied was that the laws that regulation said foundations obviously have loopholes big enough to drive a yacht through, and they clearly should be sealed up. If rich people want to start a foundation in their name, that's wonderful, but it should be clear that money going to the foundation is being used properly and not as a tax-haven

3/28/2009 11:39:39 AM

I agree with that... but the statement I was responding to said "rich people donate to their own charity for tax write offs" and that it didn't make sense. It makes a lot of sense to me if it's done the right way, that's all I was getting at.

3/28/2009 11:45:54 AM

Quote :

"I think to Obama also has an issue of to many of his liberal buddies trying to push their ideas around."

Yeah, like Pelosi and Reid
any surprise that Yucca got scrapped? Where does Reid represent? oh, right, the state in which Yucca is located... hmmm...

3/28/2009 3:02:33 PM