Windows and Doors

Windows and Doors

Proposed Budget Devalues Charity When We Need It Most

posted by Brad Hirschfield

President Obama’s newly released budget is a bold and massive affair. Is it the best thing for the country? No one can be sure. Is there wasteful spending, about equally divided between Republicans and Democrats? Yes. Did it make a mistake in its approach to charitable giving in America? In my opinion that would have to be a “yes” as well.
Under this budget, Americans making $250,000 or more a year are going to see the deduction value of their charitable donations go down from 35% to 28%. So, for example, a person making a $10,000 contribution to a charity would, under the Obama proposal, receive a tax deduction of $2800, as opposed to $3500. Does that really matter? It sure does!
Just as we are being told that recovery will require an unprecedented partnership between the public and the private sector, the administration devalues individual charity. That is not smart and it is not right. Diretor Orzag and his crew of what my friend Nathan Diament of the OU’s Institute for Public Affairs calls, the “green eye shade folks” (apparently that’s slang for accountants, and since I just learned that, I thought I would share) really messed up on this one.

It’s not that this change will cripple philanthropy. As most studies indicate, it almost certainly will not. But it does equate the value of charitable giving with all other deductible expenses. And at precisely the moment when we need to reaffirm the importance of individuals stepping up to address those in need, this does the opposite.
As president Obama told the nation this week, we must not give in to fear. He is so right about that. So why not do everything in our power to encourage people’s personal generosity at just the time they may feel too afraid to give?

  • Your Name

    A person who makes over $250,000 a year can afford the $1300. If they don’t give because of tax issues, they weren’t especially charitable in the first place. And if these are your homies, Rabbi, there are those who would not be especially sympathetic with you, religion having nothing to do with it.

  • Henrietta22

    If the wealthy can give a donation of 10,000, they can make up for the taxes elsewhere in their “budget”. Paying down the debts we have is the ‘name of the game’, and this is their sacrifice to live with, as the middle class and lower class have to, also, and have been forever.

  • Pavvel

    The wealthy give to political campaigns even though they can’t deduct it – either because they hope the politician they help elect will have an open door for them or because they believe the world will be better if their guy gets elected. They need to be encouraged to give to charitable causes on the same basic model: no deduction but a better world. And yes, the charity that gets the big donation will have an open door to the donor.
    I believe that the very idea of getting deductions for doing something good is completely the wrong model. It is true that altruism is never the basic human impulse. But the merely moderately reasonable person knows it is in their own best interests to help make the world a better place. And especially if you can do it with dollars you have lying around rather than with elbow grease, why would you not want to do it?

  • Tom

    Not everyone gives out of their abundance. People on tight budgets will give less simply because they cannot aford giving the same for a lesser deduction. Not spending money on porked up stimulus bills and other reckless spending would be an equally excellent way to pay down debts, something the morons in congress (both Democrat and Republican) and the President would do well to learn.

  • Karen Brown

    Well, Tom, except that the above post, and the budget specifically states the removal of the deduction for those making over 250K a year. If you are finding 250k a year a ‘tight budget’, tight enough that you can’t afford 1300 for charity, I’d suggest that maybe other areas of said budget could use a little trimming. (250k a year may not make you Donald Trump, but I don’t think they are honestly trying to decide between making their donation, or keeping their lights on.)
    By the way, this is from someone who makes less a month than someone making 250k a year makes a week.

  • Karen Brown

    Aww heck. I did the math. Sheesh, we’re talking people making more a MONTH than I make a YEAR. Over 20k a MONTH.
    Tight budget, Tom? If someone making almost 6k a week has a tight budget, they need to take a class on spending money like a reasonable human being.
    But hey, I’m sure the poor will understand if Joe feels he can’t manage to make the mortgage on his McMansion and still toss some change into the bellringer’s kettle.

  • Your Name

    Rabbi, I don’t even believe the new tax “increase” is relevant.
    Those who earn under $25,000 not only report disporportionately more giving than those who earn over $250,000, in many more cases those earning under $25,000 do not have enought other deductions to be counted in the totals of giving.
    Those who earn over $250,000 are losing part of their charitable contribution, but they are gaining an adjustment in alternative minimum tax. And those who earn over $250,000 or who have assets over $750,000 only give about 205 more proportionally than than the least wealthy members of society–about the amount “missing” from the total due to the fact the wealthiest take advantage of itemizing deductions far more often than the poorest.
    You may be interested in a paper on all this at Entrepreneur Magazine. But I think your concern is really misplaced here.

  • Robert

    Sorry, the above post is by me, and I should have typed 20% more instead of 205 more.

  • Tom

    You read correctly, Karen. Tight budget. Those who live within their means, have mortgage payments (those deductions will be cut as well, compounded with charity deduction cuts), have children in college, relatives with dehabilitating illnesses who’s insurance didn’t pay the whole (or even a quarter) of the costs. They’re confronted with selling their houses for a fraction of what they’ve put into it or cutting other corners. It may shock you to know that many people with six-figure incomes live modestly. I can appreciate you working in a homeless shelter, but give this class warfare crap a break already and grow up!

  • m.e.graves

    Actually, the only thing that devalues charity is when it is done for the wrong reason, such as only doing it for the tax break, and not solely out of the kindness of your heart.

  • Pavvel

    Play nice, Tom. You can disagree with someone and articulate that disagreement without calling that person’s belief about or understanding of a situation “crap” and without calling her a child.

  • Your Name

    I’m over 40 years old, Tom. I’m old enough to debate another person’s views without calling them crap, or insulting the person who gives them. You’ll note that I didn’t call you a single name. I merely noted that if a person, mortage or not, medical bills or not, even college expenses or not, can’t survive on 20 thousand dollars a month, then perhaps they need to sit with a financial advisor. Because people who make far less than that have all those same issues, and still manage to toss some money into a kettle, and some don’t even ask for a receipt. I somehow manage to pay my bills, live in a house, have medical issues of my own, and even had my kid get through college. Are there some personal exceptions that make an individual unable? I’m sure. House burns down, family with lingering cancer, etc. Which puts them in the same boat as the ones they would’ve otherwise given to. I doubt, in that situation, they would be able to give to charity, deduction or not.
    There are seasons in your life when you give, others when you receive. But legislation deals with the average person in a category. Do you think the average person making 250,000 a year can only manage to give 1300 a year to charity because they got a charitable deduction?

  • Julie

    The cut from 35% to 28% is a proposal that must be passed by Congress.
    It is not scheduled in Obama’s budget until 2011.
    The money is to be designated for a much needed health care plan that is workable for the many people without insurance.

  • Lucy Silver

    Real charity comes from the heart, not from a tax deduction. Instead of paying $100 on a bottle of wine or $5 for a delux cup of coffee several times a week (not tax deductable), people could give something of value to others. Perhaps you should have been angrier at Madoff, who REALLY cut the bone out of charities.

  • Lucy Silver

    Real charity comes from the heart and from compassion. Use the $5 you spent on a delux cup of coffee several times a week for giving-or don’t spend @100 on a bottle of wine. Geet mad at Madoff, who REALLY cut the bone out of charities.

  • Nech

    They proposal lowers the importance of charity in the governments eyes. At this critical time in the American economy we need people to give more charity, not less. This is not where the government should get the money from to improve health care. We need prayers that everything should work out okay. I recommend requesting a prayer at the Western Wall for 40 days.

  • Robert

    I probably should phrase my comment more directly.
    The proposed budget does not discourage charitable giving. Due to alternative minimum tax, for some higher-income taxpayers, and some not so high-income taxpayers
    The more you deduct, the more tax you pay, not less.
    It’s one of the peculiarities of the tax law, and it’s been patched, not fixed, by the new budget proposal. So for many higher-income givers, the reduction in the percent deductible is actually irrelevant.

  • Tom

    “I’m old enough to debate another person’s views without calling them crap, or insulting the person who gives them.”
    My apologies, Karen, if I came across disrespectfully. I didn’t call your views crap unless you are in fact a proponent of class warfare, which is how it came across to me.
    “But hey, I’m sure the poor will understand if Joe feels he can’t manage to make the mortgage on his McMansion and still toss some change into the bellringer’s kettle.”
    This sounded rather disrespectful to me (and believe me, I’m no fan of Joe the Plumber.) The point is that scarcely anyone in these times isn’t having to make numerous economical consessions including individuals and families in the yearly six-figure income braquet (and I fall well below this group). Seven hundred dollars is hardly chicken feed to anyone, and some financial planners I know who own their own business and earn well into six-figures spend money like it’s going out of style. Politely put, I would be hesitant to take their advice.
    “I doubt, in that situation, they would be able to give to charity, deduction or not.”
    There are such people who, even though burdened with illness, hardship, etc. manage to give of their time, labor, and resources to those even less fortunate. Trust me!!(I work with them)
    “Do you think the average person making 250,000 a year can only manage to give 1300 a year to charity because they got a charitable deduction?”
    The hypothetical scenario proposed by the very poignant Rabbi Hirschfield is a couple earning $250K or more who has their writeoff reduced $700 by making a $10K donation. Granted this would be one of many factors in budgeting for some of the ‘more affluent’ members of our society. To put into a numerical context, giving $9K would put the couple out roughly the same amount of money (actually $20 more) at a %28 writeoff as it would donating $10k at a 35% writeoff. People are already likely to give less due to tough economic times without the additional disincentive.

  • Tom

    Actually, it would put them out $20 less (in the 2nd to last sentence in the last paragraph I miscalculated :-)
    Damn these captchas :-(

  • Debunker

    People who give to God should not expect their reward from the government.

  • KarinaB

    Well, this is totally predictable if you look at the amounts that the Obamas and the Bidens gave to charity over the past few years: basically nada. This came out before the election– I don’t remember the exact stats, but the Bidens gave about $500 and it seems that as the Obamas income grew, the less they actually gave. Perhaps because they were paying so much more in taxes….?
    If you can reduce the amount that people give in charity, then programs that fill needs will close, and there will be a reasonable argumetn for replacing them with government programs. Basically, people who believe that government is the answer (such as the Obamas and the Bidens) see the government as a charity. Why should you give your money to a charity for indirect redistribution when the government can do it so much better? Yeah right.
    PS– Remember, according to BO — it’s good to spread the wealth around. Just don’t do it by giving to charity.

  • KarinaB

    By the way, if you give your time, not money, it’s harder to tax.

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