I don’t understand this one. I get that the U.S. government is making cutbacks to its budget for aid. Fine. As I’ve written about previously, this will mean that U.S.-based NGOs will have to rely increasingly on donations from individuals to keep their programs afloat. So you’d think that to offset these cutbacks, our government would at least try to improve incentives for individuals to donate. But the opposite is happening. According to the Chronicle of Philanthropy yesterday,
The president’s latest budget proposal would, for example, raise money for the federal Treasury by imposing new taxes on the amount the wealthy give to charity. While no one is sure what “wealthy” might ultimately mean under this plan, the president has previously suggested that he means people who make $250,000 or more per year. That definition covers more people than you might think—including the average police captain married to a nursing supervisor in New York City.
Changing the tax treatment of charitable gifts in ways that make it more costly to give those gifts will undoubtedly cause many higher-income Americans to reconsider the amount of their gifts…
Today a donor in the highest tax bracket who makes a $100,000 gift to charity is excused from paying federal income tax of up to 35 percent on that sum… Under the proposed plan, however, a new tax of $7,000 would be due because people in the upper-income brackets could only deduct charitable gifts at the 28-percent tax rate.
Will this “new tax on giving” really have much effect on our national budget? Out of the few trillion dollars the government plans to spend next fiscal year, this would theoretically save only about $7 billion. In relative terms, not a huge dent.
Beyond the short-term effects (or lack thereof), this proposal creates some long-term problems, too. Essentially, it would increase the “transaction effort” required for individuals to make a donation, by reducing the incentives available to donate in the first place. There are three actions the government is taking that signal that charitable giving is not a valuable undertaking: (1) it’s cutting on its own charitable programs, (2) it’s reducing the amount of funding it provides to NGOs, and (3) it’s giving individuals less of a reason to give on their own. Long-term, if charitable giving continues to be de-prioritized by the government, then I can only see society following suit.
Can we please to something to counteract what’s happening here?
Thanks to the FrogLoop blog for bringing light to this issue; they’ve started a petition to sign, if that’s your thing.