Taxing Charity to Fund the Big Government Obama Healthcare Plan

By Mary Kate Cary, Thomas Jefferson Street blog

There's been a huge debate lately about the size and scope of government. The lines between the two sides are most clearly drawn around the Obama administration's proposal to fund about half of the $634 billion reserve fund for health care reform by reducing the itemized deductions that taxpayers in higher brackets can take for things like donations to charity. Dan Politi writes a great analysis of the fund at slate.com.

The Chronicle of Philanthropy also has a comprehensive article which illustrates the deduction reduction with this example: if you make more than $250,000 a year, and you were to give a charity a gift of $100,000, you would save $28,000 on your taxes under the Obama proposal, rather than the $35,000 you save now. Experts at the Indiana University Center on Philanthropy estimate it could cause giving to drop by several billion dollars a year.

Statistics show that many charities derive a majority of their donations from a small proportion of their donors who are major givers. And those same major givers—those who make more than $100,000 a year—already pay more than 60 percent of total U.S. income taxes. Basically the same people who give the most money to charities also pay most of the taxes in this country, which are now going to go up. Bad news when you combine it with the worst economy in decades. As if it wasn't already difficult enough to raise money for charity.

True, most people are motivated to give to charity out of altruism, not tax concerns. But if you want to solve a problem in America, chances are there is an organization solving it somewhere—and it's not the government. In December of each year, do you know anyone with a little extra cash who sends a check to the Treasury Department as an additional year-end gift? There's a reason no one does that.

People who give money to charities know that a donation to the right organization is a very efficient use of their money—because a good charity can accomplish its goals at far less cost than the government can. The largest single share of charitable donations goes to religious congregations, which in turn are a source of hunger-relief programs such as food pantries and soup kitchens; pregnancy-related resources to help teen mothers; and volunteers for tutoring and helping the elderly. Often these programs rely on free manpower from church members as well, in order to keep costs down. And a good non-profit involved in "social justice" type programs often helps families get on their feet so that they no longer need government intervention in the first place.

Really, there's something bigger than a reserve fund at stake here: shifting our funding priorities from the private sector to the public sector. Do we want to encourage fewer donations to charity in favor of higher taxes to fund more government programs? That's really what this is all about.

Do government bureaucrats know best, or do private citizens? The Obama administration is clearly sending a message, not only to charities but to those who support them—not just Bill Gates and Warren Buffet, but church members and neighborhood giving circles like the one I joined. Just give us more of your tax money, they seem to be saying, and we'll make all the decisions. We know what's best for you.

There's an arrogance to it that really rubs a lot of people the wrong way. Including me.

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