NCPA - National Center for Policy Analysis


March 11, 2009

Among those shocked by President Obama's 2010 budget, the most surprising are the true-blue liberals who run most of America's nonprofits, universities and charities.  With his limits on tax deductions for charitable giving, they are afraid that they'll get fewer donations.  But they should be more concerned that Obama's policies will shove them aside in favor of the New Charity State, says the Wall Street Journal.

Throughout the years, Americans have given generously, notably in the 1980s as income tax rates fell and the economy boomed, says the Journal:

  • Over the last five decades, American giving has hardly deviated from 2 percent of personal income.
  • In an ideal world, the United States would eliminate most tax deductions, including the one for charity, in return for a simpler, flatter tax creating more wealth to give away.
  • However, Obama is sprinting in the opposite direction; among his policies, he proposes an increase on the top personal income tax to 39.6 percent from 35 percent.
  • The White House estimates the deduction reduction will yield $318 billion in revenue over 10 years.

In response, from the Ivy League to the United Jewish Appeal, petitions and manifestos are in the works.  And America has always operated on a different philosophy, going back to Alexis de Tocqueville's discovery of thousands of private associations that sustained communities without a commanding state.  Meanwhile, the Journal doubts that a tax benefit is what drives most giving even today.

The exception may be the confiscatory death tax that drives many of the superrich to form foundations to avoid the tax.  But the Journal suspects that without the death tax the wealthy would give even more of their income away.

Source: Editorial, "The Charity Revolt," Wall Street Journal, March 10, 2009.

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