Obama's Charitable Taking

When tax increases are "savings," reach for your wallet.

Jacob Sullum | March 4, 2009

In his speech to Congress last week, President Obama promised to "go line by line through the federal budget in order to eliminate wasteful and ineffective programs." Although the process was not completed yet, he said, "we have already identified $2 trillion in savings over the next decade."

But it turns out that tax increases account for half of those "savings." From Obama's perspective, it seems, letting people keep their own money qualifies as a "wasteful and ineffective program." That makes sense if you believe all resources are the government's to distribute as it sees fit, which is the premise underlying the multitrillion-dollar spending binge that Obama calls "A New Era of Responsibility."

Under the Bush administration, Obama said, "a surplus became an excuse to transfer wealth to the wealthy." Whatever you think about the wisdom of Bush's tax cuts, they amounted to taking less from people, not giving more to them. Obama makes it sound as if there is no meaningful difference between robbing Peter to pay Paul (which is what he has in mind when he talks about "rebalancing the tax code") and leaving Peter alone (or, more accurately, robbing him less thoroughly)—except that the latter option is, in Obama's view, morally inferior.

The same attitude is apparent in the Obama administration's defense of its plan to limit tax deductions for households earning more than $250,000 a year. Peter Orszag, Obama's budget director, says it's "a question of fairness." How so? "If you're a teacher making $50,000 a year and decide to donate $1,000 to the Red Cross or United Way, you enjoy a tax break of $150," Oszag explains. "If you are Warren Buffet or Bill Gates and you make that same donation, you get a $350 deduction—more than twice the break as the teacher."

But that's because the tax rate for the rich guys is more than twice as high as the tax rate for the teacher. They get a bigger "break" because they pay more in taxes to begin with. The unfairness that the Obama administration perceives is built into a system of progressive taxation that includes deductions.

In response to nonprofit organizations worried that limiting the deduction for charitable contributions will reduce donations, The Washington Times reports, Orszag "said Mr. Obama took care of that by giving charities government money to make up part of the difference." Orszag noted that "in the recovery act, there's $100 million to support nonprofits and charities." In essence, then, Obama plans to take money people otherwise would have given to the charities of their choice and give it to the charities of his choice.

Obama insists he is only raising taxes on "the wealthy" and emphasizes that "the recovery plan provides a tax cut...for 95 percent of working families"—a credit of $400 per taxpayer. Yet even leaving aside the enormous increase in debt on which Obama's spending relies (which will mean higher taxes in the future), the tax cut he promises is illusory.

To continue the tax credit past two years, Obama is counting on $646 billion in revenue from "a market-based cap on carbon pollution," which has essentially the same impact as a carbon tax, although the cost is less explicit: It raises the price of every product and service that contributes to carbon dioxide emissions, and it reduces economic growth, making everyone poorer than they otherwise would have been. At best, the tax credit will make up for a fraction of these effects.

Even the name of Obama's tax credit is insulting: "Making Work Pay." What makes work pay is the willingness of other people to pay for it. Taxes subtract value from this arrangement; they do not add to it. Obama not only wants to take his cut; he wants to take credit for taking less than he could have—indeed, for letting you keep anything at all. As far as he's concerned, the fruits of your labor are yours only by the grace of government.

© Copyright 2009 by Creators Syndicate Inc.

Comments

tarran|3.4.09 @ 7:18AM|#

I think that Obama is making a deal with the devil much like the one I thought that Bush made.

Throughout the Bush presidency, I was convinced that his refusal to veto anything was the product of his willingness to horse trade with Congress; he would allow them their spending binge in return for their support for his wars.

Obama is planning a Great Leap Forward in the energy production sectors of the economy. I suspect he is allowing the Congress to go on a spending binge in order to buy their support.

And, it will turn out about as well as Bush's efforts did.

I\'ll lie for him here|3.4.09 @ 8:02AM|#

Obama is cutting taxes for %95 of taxpayers.
Your taxes won't go up one thin dime.

ed|3.4.09 @ 8:21AM|#

There's more to "taxes" than the income tax.
It's simplistic (and subversive) to focus solely on that.

Josiah|3.4.09 @ 8:26AM|#

Work Makes Pay?

anti-joe|3.4.09 @ 8:27AM|#

Yes, the article mentions Carbon taxes as well.

Mad Max|3.4.09 @ 8:33AM|#

'In response to nonprofit organizations worried that limiting the deduction for charitable contributions will reduce donations, The Washington Times reports, Orszag "said Mr. Obama took care of that by giving charities government money to make up part of the difference."'

Astonishing.

kilroy|3.4.09 @ 8:33AM|#

Your taxes won't go up one thin dime.

Cigarette tax up a buck a pack but smoking is a sin so that wouldn't count. I don't imagine the carbon taxes will be passed along to consumers either....

|3.4.09 @ 8:34AM|#

Subversives!

We have subversives in our midst!

What do we do with subversives?

|3.4.09 @ 8:52AM|#

What do we do with subversives?

Feed them to killer sheep.

|3.4.09 @ 9:08AM|#

This whole "your taxes won't go up one dime" rings pretty damned hollow. First, I don't beleive that. Second and more importantly, since when did the fact that an unjust policy didn't directly affect me deprive me of the right to object to it? I doubt many liberals are in much danger of going to GUITMO, but that doesn't make their objects to the place per say invalid. More importantly, how many honest people do we have to stand aside and let BO demonize before people start objecting?

KipEsquire|3.4.09 @ 9:28AM|#

Assume Taxpayer 1 initially earns twice as much as Taxpayer 2, and therefore pays a higher marginal tax rate. Assume next that each receives an extra $1000 in income, and that both donate the entire $1,000 to a qualified charity.

Under the Obama plan, Taxpayer 1 still has a higher tax burden, both in absolute terms and relative to Taxpayer 2, than he had before they received and donated the extra income, even though he is no better off, either in absolute terms or relative to Taxpayer 2.

What planet do you have to be from to suggest that doing this is somehow "fair" (or, more correctly, that not doing this is somehow "unfair")?

|3.4.09 @ 9:35AM|#

Fedpukes define every dollar not seized from the taxpayer as a 'tax expenditure'. In their warped world, each new dollar taken morphs into 'savings'.

We are at the point where fedzilla can and will mine us for dollars harder than Boone Pickens sucks oil/gas/water from the Texas landscape; then return us a pittance telling us how we shall spend it at the fedzilla company store.

stuartl|3.4.09 @ 9:38AM|#

There's more to "taxes" than the income tax.
It's simplistic (and subversive) to focus solely on that.

Obama's speech last week was simplistic (and subversive)? I thought so too.

Mike M.|3.4.09 @ 9:43AM|#

This whole "your taxes won't go up one dime" rings pretty damned hollow. First, I don't believe that.

As you shouldn't, because it's B.S. In addition to the inevitable expiration of the tax rate decreases from a few years ago, they're apparently having serious discussions about eliminating the home mortgage interest deduction!

Obviously, this is going to impact a hell of a lot more people than those making $250K. Anyone who bought a house at or around the peak of the boom is going to particularly take it in the shorts, as though they haven't enough already.

I\'ll lie for him here|3.4.09 @ 9:50AM|#

Mike M.,

Sounds like you have been listening to Rush Limbaugh too much.Under Obama's plan everyone earing less than 250k has their taxes reduced.

|3.4.09 @ 9:51AM|#

That is right Mike. Anyone who disagrees with DearlyBeloved Leader and what is put out in the state run media is just a bitter Rush head unable to face the truth. If people like you don't start getting with the program, we are going to have to do something about that.

|3.4.09 @ 9:57AM|#

John, I, myself find pretty much everything our DearlyBelovedLeader is doing to be agreeable with my bible thumping egalitarian beliefs. (see robin hood)

|3.4.09 @ 10:16AM|#

"John, I, myself find pretty much everything our DearlyBelovedLeader is doing to be agreeable with my bible thumping egalitarian beliefs. (see robin hood)"

Then you should, unlike mike and I fit in quite well with the fascist movement that is BO.

|3.4.09 @ 10:38AM|#

John,I, and 10s of millions of other voters, fit the wiki definition of fascism to a tee. The bright side is that libertarianism should be a shoe in after this little run ends in 20 years or so.

Tyler|3.4.09 @ 10:47AM|#

"Yes, the article mentions Carbon taxes as well."

It's actually a cap-and-trade, which is much worse for a few reasons:

1) It sets a precedent that the government owns the air and can auction off the privilege to use it.

2) It actually benefits the biggest and baddest oil and coal companies by allowing them to muscle out smaller competition (they can buy up all the "carbon receipts" and establish a cartel on the ability to burn fuel). Don't be surprised when those companies that made campaign contributions get special deals out of this mess. Expect higher rates and pretty much every other downside of corporatism/fascism.

3) The most dangerous thing about this legislation is that it will probably be a huge political succes. A carbon TAX would be a political disaster, but a cap-and-trade sounds clever and can be advertised as a "market-based" solution despite being the opposite. The "cap" part is a huge success for power-hungry greens who care only about carbon emissions. Meanwhile, the politically connected oil and coal compaies also get a better deal out of it.

The only real losers are sanity, our wallets, and liberty.

|3.4.09 @ 10:51AM|#

I will say that I believe that the willingness of a great many people to allow for govt to assume control is based on perception of the cause of problems in this country. Not necessarily on reality. With a large side order of jealousy and revenge.
The short of it is that you and I have differing beliefs about society. The problem for you is there are many more folks right now that agree with me. That will change in time. Unless of course Obama's policy's are wildly successful.

stuartl|3.4.09 @ 10:53AM|#

1) It sets a precedent that the government owns the air and can auction off the privilege to use it.

We do all exhale CO2, so the government should tax the air we breath for our own good. There should be a bean tax as well.

|3.4.09 @ 11:11AM|#

your taxes won't go up one dime

Whenever my friends would talk about how wonderful Hillary was, I'd just point out that I was still waiting for Bill's middle class tax cut that he promised in 1992.

LarryA|3.4.09 @ 11:56AM|#

So "A New Era of Responsibility" means we won't exercise any.

The bright side is that libertarianism should be a shoe in after this little run ends in 20 years or so.

When you raise a generation of people without teaching them to run their own lives you end up with a generation that can't run a government. The shoo-in is barbarism.

|3.4.09 @ 2:39PM|#

The New Era Of Responsibility: You and I are Responsible for supporting the politicians and the banking elite that own them.

How about a truly new era of Liberty, instead?

Colonel_Angus|3.4.09 @ 3:28PM|#

The whole tax system of deductions is retarded and inefficient.

|3.4.09 @ 4:56PM|#

The whole itemized deduction argument is incorrect. If you make over $159,950 in Adjusted Gross Income, your itemized deductions become limited (see line 29 on Schedule A). The same applies to the Number of Exemptions (line 42 on Form 1040). They also get charged the Alternative Minimum Tax (line 45 on Form 1040).

JW Gacy|3.4.09 @ 5:40PM|#

Woot. This went live on RCP.

Hayden|3.4.09 @ 5:47PM|#

I'm glad BO's new regime is moving so radically. If they were more subtle it wouldn't as obvious when their plans fail. I say step on the accelerator and drive the country right off the cliff, it will have to get that bad before things can get better. Plus their ideas will be discredited for generations and we won't have to repeat this insanity anytime soon.

|3.4.09 @ 5:47PM|#

Dont' forget the lifting of the SS tax on earnings above 103K. So, if you make over that amount, you have now received a 7.5 percent tax increase on those earnings. Not to mention, your employer will also be liable for the other 7.5 percent, which will cut into their earnings, and lead to more scrutiny when retaining or thinking of hiring new employees.

dude|3.4.09 @ 6:02PM|#

With profit and earnings ratios where there are at this is an awesome time to get some deals if you have a long term view. That will surly cover any losses to taxes.

I've come to the conclusion that the majority of lawyers, even the ones that graduate with honors from Harvard, think they are leaps and bounds smarter than they actually are.

Someone needs to explain P/E to someone.

Brian|3.4.09 @ 6:08PM|#

You miss the point of the tax deduction for charitable donations. The point of the donation is that the amount of a charitable donation is not taxed, so that everyone has the same incentive to give to charity.

Thus everyone is not taxed on the money the give away to an approved charity.

President Obama seems to think that most people shouldn't be taxed on the money they give to charity, but the rich should pay an additional amount over the charitable contribution to the government.

Craig|3.4.09 @ 6:51PM|#

Wow -- he's found a whopping $200 billion per year in potential "savings". And he's only tacking on an additional $1.2 trillion or so in new spending this year! And he's promising to cut the deficit in half in 8 years, after tripling it in one! What a feat!

And no, taxes won't go "down" for 95% of Americans -- when spending goes up by as much as it is about to, we all pay -- either in higher taxes now, or higher taxes later, or a debased currency. No matter who pays the taxes first, the cost gets distributed to everyone eventually.

Craig|3.4.09 @ 6:53PM|#

With profit and earnings ratios where there are at this is an awesome time to get some deals if you have a long term view....

Someone needs to explain P/E to someone.

Okay, here's an explanation: When the "E" drops dramatically, don't expect the "P" to recover any time soon. In other words, don't look at trailing "E" when trying to predict future "P".

Craig|3.4.09 @ 6:58PM|#

John, I, myself find pretty much everything our DearlyBelovedLeader is doing to be agreeable with my bible thumping egalitarian beliefs. (see robin hood)

But keep in mind that Robin Hood didn't simply "steal from the rich to give to the poor" as the common saying goes. He stole from the government to give something back to the people the government stole from first in the form of crushing taxes, and disrespected the legal authority of the Sheriff of Nottingham along the way -- quite a role model, but not for big-government types.

thedudeknowsP/E|3.4.09 @ 7:14PM|#

While the explanation was great. P/E is price to earnings not profit and earnings. Hence the call for someone to do some splaining to someone else.

|3.4.09 @ 7:22PM|#

Why are you surprised? It was clear from the beginning that Obama is a far-left Socialist

|3.4.09 @ 7:37PM|#

"Plus their ideas will be discredited for generations and we won't have to repeat this insanity anytime soon."


I suggest that this is exactly the situation with the repubs and "capitalism". The perception is that the R's and the greedy capitalists have lied stolen and cheated the system to the point that the system has failed. Now the Government led by Obama and the super Ds is the only thing that can fix America.

|3.4.09 @ 8:40PM|#

I've said it before and I'll say it again:

FOLKS, WE ARE SCREWED!!!

The One|3.4.09 @ 8:55PM|#

Eric Arthur Blaire (George Orwell to you and I) would love the language of Obama.

Do 1984 and George Orwell come to mind?

What Obama is actually doing - tho I do not believe intentionally - is destroying wealth.

And, by that, suppressing our future.

But we deserve who we vote for. I liked George Bush - but not qualified for President.

Obama - I like him, but he is young and does not understand economics.

Good luck to all of us!

The One

|3.4.09 @ 11:39PM|#

Well written, but you seem to have forgotten about the situation our economy is in right now. To say that the government will distribute all wealth sounds like they are doing it for no reason at all. Obviously, Obama does not feel like taking people's money and throwing it out to a bunch of his buddies. He is distributing the money to those who need it the most, in order to STIMULATE the economy.

|3.4.09 @ 11:44PM|#

Obama does not feel like taking people's money and throwing it out to a bunch of his buddies

So I was just imagining the billions of dollars he's giving away to ACORN, unions, and other Democrat hangers-on?

He is distributing the money to those who need it the most, in order to STIMULATE the economy

Those who need it most, like the health care sector, which already has a low unemployment rate? How does that stimulate anything?

raiseshishand|3.5.09 @ 7:42AM|#

I do believe I need my money, the wealth I generate, the most.

|3.5.09 @ 10:16PM|#

I'm going to buy a Porshe on credit, and tell my wife she should be happy because I "saved" lotsa money by not buying a Rolls.

|3.7.09 @ 4:19PM|#

So when are taxes good? The broadbrushed swipe at "taxes" is useless when we are debating the level of appropriate taxes. They are necessary to accomplish government objectives and deliver desired services. Until there is a very clear enunciation about what those objectives and services should be, we can't determine the level of taxes. Obama seems to be quite clear about his objectives and desired services. Where's your response?

Chad|3.8.09 @ 11:20PM|#

My taxes need to go up. So do yours. The taxes of rich people need to go up a whole crapload.

Taxes may be "bad for the economy" according to classical economic theory, but few conservatives or libertarians ever bother to ask just how bad....and the answer is that they barely matter over a wide range of tax rates. Running massive deficits and leaving all sorts of public systems underfunded so we can all buy just one last piece of cheap Chinese crap is pure stupidity.