Priorities, Taxes and Charitable Giving
President Obama’s new budget proposals would limit itemized tax deductions to 28% for people who earn more than $250,000. It also calls for reinstating marginal tax rates of 39.6% for the same group. As a result, The Center on Philanthropy at Indiana University projects that overall charitable giving could decrease by 2.1% or $3.9 billion. The plan is for these revenues to help achieve universal health insurance and fiscal stimulus.
In addition to Republican and some Democratic opposition, there is expected concern in philanthropy over reduced charitable giving. This is misguided for two reasons: The charitable deduction is a public policy choice about the use of public money. It is a mistake to think of exempt contributions as simply the private choice of wealthy individuals.
It is an allocation decision about public revenues. Such choices require a broad view of the economy over a narrowly sectarian one.
Secondly, if the Obama allocation choice works, then the achievement of universal healthcare (which many donors seeks to advocate) will relieve a huge burden on Americans and on corporate budgets. Furthermore, if the stimulus works, then the economy will grow, wealth will grow, and more charitable capacity will be generated at whatever tax rate. The Center on Philanthropy report also recognizes that the general economic climate will have the greatest effect on giving; negatively now, and perhaps positively in the future.
Above all then, it is important to recognize that this is a public policy choice, and not some infringement on an inherent right of wealth.
In the book The Spirit Level: Why more equal societies almost always do better, Richard Wilkinson and Kate Pickett argue (andThe Economist agrees) that inequality is more responsible for the social ills of society than any other single cause including poverty itself. It’s worth reflecting on the fact that over the last 30 years charitable giving has grown while inequality has also grown beyond historic proportions. We need to re-equiliberate and re-invert that equation. With more equality there might be less need for charitable giving to alleviate and reform social ills.