President Obamas latest revelation in his plan to change" America came to light during hearings on his proposed tax increases. It is directed toward families with incomes over $250000.
In testimony before the U.S. Senate Finance Committee Treasury Secretary Timothy Geithner outlined Obamas plan to reduce how much families with incomes over $250000 can deduct for charitable contributions on federal income tax returns while also limiting the amount this group can claim for mortgage interest as well as state and local taxes. This policy will be implemented at the same time that the top income tax rate will rise from 35 percent to 39.5 percent.
The amount raised from the limits on deductions for charitable contributions alone is projected to be almost $180 billion over the next ten years. Given that charitable gifts come from disposable income reducing disposable income through higher taxes will result into less money for charitable contributions.
The impact this change" will have on charitable contributions has raised concern even among some liberal Democrats. Senate Finance Chairman Max Baucus and Rep. Charles Rangel the chairman of the House Ways and Means Committee have both expressed concern about the impact such limits would have on charitable giving. Charitable organizations and foundations are concerned as well and rightly so.
The Philanthropy Journal published a report documenting a 24.3 percent increase in charitable giving in 1982 (after Reagans 1981 income tax rate cuts went into effect.) After the 1993 tax hike pushed by the Clinton Administration and passed by the Democrat majorities in Congress charitable giving declined by .42 percent. Keep in mind that Clintons tax increase did not limit the deductions for charitable contributions made by higher-income families. Charitable contributions remained relatively flat in the years following the Clinton income tax increase only to shoot up 10.2 percent in 1997 following the cut in capital gains taxes passed by the Republican majority in Congress.
Following the 2003 tax cut that included reducing the top income rate for higher income families from 39.5 percent to 35 percent charitable giving among the higher-income earners rose by 23.1 percent the first year after and 21.3 percent the second year.
The point is this the historical record shows that changes in tax rates impact charitable giving.
To put Obamas tax assault against higher-income earners into perspective: those with adjusted gross incomes over $250000 represent about two percent of all taxpayers yet account for 48 percent of all" income taxes paid and for about 28 percent of all charitable contributions. According to the Center on Philanthropy at Indiana University in 2006 these contributions totaled about $81 billion.
If Obamas tax increases go into effect these higher-income earners will be paying an even higher percentage of income taxes which based on past history of tax increases will undoubtedly reduce their charitable contributions. In fact the Center on Philanthropy released a report showing that 47 percent of affluent households said they would give less if their tax deductions for charitable contributions are reduced. The Center estimated that if Obamas reduction in charitable contribution deductions were in effect in 2006 charitable contributions would have declined by $3.9 billion.
So who will Obamas tax increase hurt the most? It will certainly hurt the workforce because higher taxes impact economic expansion and slow job growth. It definitely hurts those who benefit the most from private charities. It obviously hurts charitable organizations and non-profit groups that depend on the generosity of higher-income earners. And it hurts religious congregations which benefitted from over a third of all charitable contributions in 2007.
And increasing taxes on charitable giving especially hurts conservatives.
In an article written for The Wall Street Journal Arthur Brooks reported that a Gallup Poll conducted last May found that people who identify themselves as conservative" or very conservative" represented about 42 percent of the total population yet accounted for 56 percent of total charitable contributions. Liberals who represented about 29 percent of those in the survey accounted for only seven percent of donations.
The bottom line this is a tax increase that will squeeze charitable giving and is yet another example of how President Obama is changing America. Instead of increasing the incentives for charitable giving he is going to punish those who give the most by taking their discretionary money redistributing it to others and making government bigger and more expensive for everyone.
In the end reducing our ability to support charitable organizations and non-profit groups will undermine our independence and increase the power and influence of government in our everyday lives.
Gary Palmer is president of the Alabama Policy Institute a non-partisan non-profit research and education organization dedicated to the preservation of free markets limited government and strong families which are indispensable to a prosperous society.
President Obamas latest revelation in his plan to change" America came to light during hearings on his proposed tax increases. It is directed toward families with incomes over $250000.
In testimony before the U.S. Senate Finance Committee Treasury Secretary Timothy Geithner outlined Obamas plan to reduce how much families with incomes over $250000 can deduct for charitable contributions on federal income tax returns while also limiting the amount this group can claim for mortgage interest as well as state and local taxes. This policy will be implemented at the same time that the top income tax rate will rise from 35 percent to 39.5 percent.
The amount raised from the limits on deductions for charitable contributions alone is projected to be almost $180 billion over the next ten years. Given that charitable gifts come from disposable income reducing disposable income through higher taxes will result into less money for charitable contributions.
The impact this change" will have on charitable contributions has raised concern even among some liberal Democrats. Senate Finance Chairman Max Baucus and Rep. Charles Rangel the chairman of the House Ways and Means Committee have both expressed concern about the impact such limits would have on charitable giving. Charitable organizations and foundations are concerned as well and rightly so.
The Philanthropy Journal published a report documenting a 24.3 percent increase in charitable giving in 1982 (after Reagans 1981 income tax rate cuts went into effect.) After the 1993 tax hike pushed by the Clinton Administration and passed by the Democrat majorities in Congress charitable giving declined by .42 percent. Keep in mind that Clintons tax increase did not limit the deductions for charitable contributions made by higher-income families. Charitable contributions remained relatively flat in the years following the Clinton income tax increase only to shoot up 10.2 percent in 1997 following the cut in capital gains taxes passed by the Republican majority in Congress.
Following the 2003 tax cut that included reducing the top income rate for higher income families from 39.5 percent to 35 percent charitable giving among the higher-income earners rose by 23.1 percent the first year after and 21.3 percent the second year.
The point is this the historical record shows that changes in tax rates impact charitable giving.
To put Obamas tax assault against higher-income earners into perspective: those with adjusted gross incomes over $250000 represent about two percent of all taxpayers yet account for 48 percent of all" income taxes paid and for about 28 percent of all charitable contributions. According to the Center on Philanthropy at Indiana University in 2006 these contributions totaled about $81 billion.
If Obamas tax increases go into effect these higher-income earners will be paying an even higher percentage of income taxes which based on past history of tax increases will undoubtedly reduce their charitable contributions. In fact the Center on Philanthropy released a report showing that 47 percent of affluent households said they would give less if their tax deductions for charitable contributions are reduced. The Center estimated that if Obamas reduction in charitable contribution deductions were in effect in 2006 charitable contributions would have declined by $3.9 billion.
So who will Obamas tax increase hurt the most? It will certainly hurt the workforce because higher taxes impact economic expansion and slow job growth. It definitely hurts those who benefit the most from private charities. It obviously hurts charitable organizations and non-profit groups that depend on the generosity of higher-income earners. And it hurts religious congregations which benefitted from over a third of all charitable contributions in 2007.
And increasing taxes on charitable giving especially hurts conservatives.
In an article written for The Wall Street Journal Arthur Brooks reported that a Gallup Poll conducted last May found that people who identify themselves as conservative" or very conservative" represented about 42 percent of the total population yet accounted for 56 percent of total charitable contributions. Liberals who represented about 29 percent of those in the survey accounted for only seven percent of donations.
The bottom line this is a tax increase that will squeeze charitable giving and is yet another example of how President Obama is changing America. Instead of increasing the incentives for charitable giving he is going to punish those who give the most by taking their discretionary money redistributing it to others and making government bigger and more expensive for everyone.
In the end reducing our ability to support charitable organizations and non-profit groups will undermine our independence and increase the power and influence of government in our everyday lives.
Gary Palmer is president of the Alabama Policy Institute a non-partisan non-profit research and education organization dedicated to the preservation of free markets limited government and strong families which are indispensable to a prosperous society.
