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Obama's Charitable Taking
One of President Obama's proposed tax increases involves limiting itemized deductions for higher-income taxpayers. According to The New York Times, everyone in the 35 percent bracket and many people in the 33 percent bracket would be treated, for the purpose of calculating deductions, as if their marginal rate were 28 percent. Hence a $10,000 charitable donation that currently reduces the tax bill of someone in the top bracket by $3,500 would instead be worth $2,800. The Times explains the official rationale for the change this way: "The White House says it is unfair for high-income people to get a bigger tax break than middle-income people for claiming the same deductions or making the same charitable contributions." The equity argument here is questionable, since the reason high-income people get "a bigger tax break" is that they pay more in taxes to begin with, not just in absolute terms but proportionally. In other words, this is the natural result of having a progressive income tax. Note that the unfairness perceived by the Obama administration also could be remedied by eliminating deductions or by taxing everyone at the same rate.
To my mind, those are both good ideas, but the government is not likely to stop using the tax code for social engineering anytime soon. And assuming that tax deductions aimed at encouraging certain kinds of behavior work as advertised, reducing them should be expected to result in less of the desired behavior. Hence the worries about how Obama's tax plan will affect charitable donations:
"This will lead people to give less to charities if they behave the way they've behaved in the past," [Roberton Williams, senior fellow at the Tax Policy Center,] said. "We've already seen a drop in giving as a result of the economic collapse. On top of that, this will just reduce the amount of giving."
Asked about that, Office of Management and Budget Director Peter Orszag said Mr. Obama took care of that by giving charities government money to make up part of the difference.
"Contained in the recovery act, there's $100 million to support nonprofits and charities as we get through this period of economic difficulty," he said.
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. In a similar maneuver, Obama is floating the idea of taxing health insurance to pay for health insurance:
To finance health care reform, administration officials suggested to senior aides in Congress on Wednesday that revenues could be raised by ending the policy of excluding the value of employer-provided health insurance from income taxes.
But the officials emphasized that the administration was not advocating that option, which not only is anathema to some in organized labor and business but also conflicts with Mr. Obama's position in last fall's presidential campaign.
I'm not sure I understand the distinction between suggesting something is a good idea and advocating it. But assuming that Obama really does want to tax employer-provided health insurance, he may be onto something. The government should stop encouraging businesses to give employees medical coverage in lieu of cash or other benefits, a policy that perpetuates the artificial link between employment and health insurance. That link, in turn, impairs mobility, fosters anxiety and insecurity, contributes to rising health care costs, and retards the development of a competitive and flexible health insurance market. But the problem can be fixed without a net increase in taxes. One approach, backed by George W. Bush, is to allow a standard deduction for medical expenses, whether they're paid by individuals or by employers. During last year's presidential campaign, John McCain suggested a variation on that theme, a tax credit for medical coverage that would go directly to the insurer chosen by the taxpayer. Another option, which I'd prefer in the interest of a simpler, less intrusive tax code, is to compensate for the increase in taxable income by cutting rates. For Obama, of course, raising revenue is the whole point.
|2.27.09 @ 3:55PM|#
Look, why don't they just subject all of the "rich" to a sound thrashing? Jesus, can we stop with the class crap already?
|2.27.09 @ 3:55PM|#
Asked about that [reduced charitable donations], Office of
Management and Budget Director Peter Orszag said Mr. Obama took
care of that by giving charities government money to make up part
of the difference.
"Contained in the recovery act, there's $100 million to support
nonprofits and charities as we get through this period of economic
difficulty," he said.
And they're giving it to the exact same organization you were going
to. These guys are not only beneficent, they're psychic.
|2.27.09 @ 3:58PM|#
HTML is not my friend today. I'll try again [using preview you
idiot he mutters to himself]
Asked about that [reduced charitable donations], Office of Management and Budget Director Peter Orszag said Mr. Obama took care of that by giving charities government money to make up part of the difference.
"Contained in the recovery act, there's $100 million to support nonprofits and charities as we get through this period of economic difficulty," he said.
And they're giving it to the exact same organization you were going
to. These guys are not only beneficent, they're psychic.
stuartl|2.27.09 @ 4:02PM|#
The White House says it is unfair for high-income people to
get a bigger tax break than middle-income people for claiming the
same deductions or making the same charitable
contributions.
Good lord, they really do believe it is their money. To follow this
argument to its logical conclusion, there should be no deduction at
all, since people in the lowest brackets (not paying any taxes)
don't get a deduction for contributions.
This will lead people to give less to charities if they behave
the way they've behaved in the past," [Roberton Williams, senior
fellow at the Tax Policy Center,] said.
Asked about that, Office of Management and Budget Director Peter
Orszag said Mr. Obama took care of that by giving charities
government money to make up part of the difference.
After all, we know rich people would give money to wrong charities,
like the Reason Foundation.
|2.27.09 @ 4:04PM|#
Don't be foolish, J sub D. The government will allocate the money to the correct charity, not to whatever two-bit outfit you were thinking of donating it to. Who are you to substitute your bourgeois preferences for the greater good of the state? Huh? This isn't the Bush administration, fella, this is the Philosopher King come to roost.
Jim|2.27.09 @ 4:07PM|#
This is the end
Beautiful friend
This is the end
My only friend, the end
Of our elaborate plans, the end
Of everything that stands, the end
No safety or surprise, the end
Ill never look into your eyes...again
Can you picture what will be
So limitless and free
Desperately in need...of some...strangers hand
In a...desperate land
Lost in a roman...wilderness of pain
And all the children are insane
All the children are insane
Waiting for the summer rain
Mike Laursen|2.27.09 @ 4:09PM|#
And allow a tax break for paying for somebody else's health insurance. At least allow it for health insurance for one's parents.
robc|2.27.09 @ 4:12PM|#
I dont think Obama understand how deductions work (actually, I
think he does, which is worse). The deduction isnt from the tax, it
is from the Gross Income.
After that, the tax is calculated. A 100k donation doesnt reduce
your tax by 3.5k or 2.8k, it reduces your taxable income by 100k
and then a tax number is calculated.
Yeah, yeah, it is semantics, but damn important semantics.
robc|2.27.09 @ 4:15PM|#
What this is saying, in effect, is that if you are in the 35% bracket only 80% of your donations are deductible. You have to pay taxes on the other 20%.
Astroglide|2.27.09 @ 4:20PM|#
"What this is saying, in effect, is that if you are in the 35%
bracket only 80% of your donations are deductible. You have to pay
taxes on the other 20%."
They did that to business some years back with regard to meals and
entertainment. Used to be 100% deductible
robc|2.27.09 @ 4:22PM|#
They did that to business some years back with regard to
meals and entertainment. Used to be 100% deductible
Im well aware. Well, since my businesss started its always been the
way it is now.
|2.27.09 @ 4:22PM|#
Jim, Jim, Jim, you left out the best parts. Here's the whole
song:
This is the end, beautiful friend.
This is the end, my only friend, the end.
Of our elaborate plans, the end.
Of everything that stands, the end.
No safety or surprise, the end.
I'll never look into your eye(s) again.
Can you picture what will be,
So limitless an' free?
Desperately in need of some stranger's hand,
In a desperate land.
[Instrumental break.]
Lost in a Roman wilderness of pain.
An' all the children are insane.
All the children are insane.
Waiting for the summer rain, yeah.
There's danger on the edge of town.
Ride the king's highway, baby.
Weird scenes inside the gold mine.
Ride the highway west, baby.
Ride the snake, ride the snake,
To the lake, the ancient lake, baby.
The snake is long, seven miles,
Ride the snake,
He's old an' his skin is cold.
The west is the best.
The west is the best.
Get here, an' we'll do the rest.
The blue bus is callin' us.
The blue bus is callin' us.
Driver, where you takin' us?
[Spoken:]
The killer awoke before dawn,
He put his boots on.
He took a face from the ancient gallery.
An' he walked on down the hall.
He went into the room where his sister lived, an'
Then he, paid a visit to his brother,
An' then he, he walked on down the hall, an'
An' he came to a door, an' he looked inside.
"Father?" "Yes son?"
"I want to kill you.
Mother I want to fuck you."
C'mon, woah.
C'mon baby, take a chance with us.
C'mon baby, take a chance with us.
C'mon baby, take a chance with us.
An' meet me at the back of the blue bus.
Do'n' a blue rock on a blue bus.
Do'n' a blue rock, c'mon, yeah.
[Instrumental break.]
Kill, kill, kill, kill, kill, kill.
This is the end, beautiful friend.
This is the end, my only friend, the end.
It hurts to set you free but you'll never follow me.
The end of laughter an' soft lies.
The end of nights we tried to die.
This is the end.
|2.27.09 @ 4:30PM|#
I noticed this idiocy a couple of days ago, and I'm already
developing a battle plan:
-same contribution as last year, despite higher income.
-all, rather than some, money going towards freedom-oriented
organizations (the food bank can suck it in '09 and if they ask
why, I'm yodelling OBAMA)
Astroglide|2.27.09 @ 4:34PM|#
Today is February 27, 2009. The time is 4:30 pm EST and I am going on record with my prediction that in 2010, the Democrats will lose at least the Senate and likely the house. And in 2012 Obama will not win the presidential election. I stand by this prediction. Why, because you can't screw all of the people all of the time and get away with it. This isn't good governance, people; it's a never ending gang rape.
stuartl|2.27.09 @ 4:36PM|#
The killer awoke before dawn,
He put his boots on.
One of my nominees for the all time least inspired rock lyrics.
stuartl|2.27.09 @ 4:39PM|#
...it's a never ending gang rape.
But it is okay, it is only the evil rich. They deserve it.
|2.27.09 @ 4:40PM|#
The P Brooks Drinking Game:
Every time a government employee utters the word "fair" (or some
variant thereof)...
DRINK!
We'll all be dead of alcohol poisoning before April Fools' Day.
Gilbert Martin|2.27.09 @ 4:42PM|#
"To finance health care reform, administration officials
suggested to senior aides in Congress on Wednesday that revenues
could be raised by ending the policy of excluding the value of
employer-provided health insurance from income taxes. "
Well that would be violatoin # 3 (and counting) of Obama's promise
not to raise taxes on anybody making less than $250 K per
year.
#1 was the new tax on smokes.
#2 is the new energy tax that will result from his eco-socialist
wacko "greenhouse gasses" policy.
The list will undoubtedly get much longer.
Gibert Martin|2.27.09 @ 4:43PM|#
"We'll all be dead of alcohol poisoning before April Fools'
Day."
Ha! - it's more like by the end of next week.
|2.27.09 @ 4:44PM|#
Hey Jacob, could you tell us where this quote came from?
"To finance health care reform, administration officials suggested
to senior aides in Congress on Wednesday that revenues could be
raised by ending the policy of excluding the value of
employer-provided health insurance from income taxes."
I didn't see it in the Wash. Times article.
Jesus Obama|2.27.09 @ 4:50PM|#
15 Then went the Libertarians, and took counsel how they might
entangle Him in his talk.
16 And they sent out unto Him their disciples with the Reasonites,
saying, Master, we know that thou art true, and teachest the way of
God in truth, neither carest thou for any man: for thou regardest
not the person of men.
17 Tell us therefore, What thinkest thou? Is it lawful to give
tribute unto Washington, or not?
18 But Barack perceived their wickedness, and said, Why tempt ye
me, ye hypocrites?
19 Shew me the tribute money. And they brought unto Him a dollar
bill.
20 And He saith unto them, Whose is this image and
superscription?
21 They say unto him, Washington's. Then saith He unto them, Render
therefore unto Washington the things which are Washington; and unto
God the things that are God's.
- Barack 20: 15-21
|2.27.09 @ 4:56PM|#
Well that would be violatoin # 3 (and counting) of Obama's
promise not to raise taxes on anybody making less than $250 K per
year.
They'll say its a tax on business and not on employees. We know who
really pays it, but that will be their argument.
classwarrior|2.27.09 @ 5:02PM|#
Unfortunately, Jacob continues the myth that the wealthy pay a higher percentage of their income in tax than the rest of us. That may be true for income tax, but ignores the effect of other regressive taxes such sales and property taxes. When these are factored in, the total tax paid as a percentage of income is often lower for the wealthy.
Gilbert Martin|2.27.09 @ 5:08PM|#
"They'll say its a tax on business and not on employees. We know
who really pays it, but that will be their argument."
If they start including the value of health insurance as taxable
income on your W-2 form, that will be a direct tax increase on
you.
|2.27.09 @ 5:13PM|#
SON OF A BITCH! This makes me want to punch a nun. Seriously,
WTF?! Even at my most cynical, I had a hidden, perverted hope for
this guy to prove me wrong. Joke's clearly on me.
GodDAMNit! Happy effing Friday...
|2.27.09 @ 5:41PM|#
If they start including the value of health insurance as
taxable income on your W-2 form, that will be a direct tax increase
on you.
Which is why they will probably hide it on the employer side of
things.
Gilbert Martin|2.27.09 @ 5:44PM|#
Here is another nefarious consequence of Obama's capping of the
charitable contributions mentioned above:
http://money.cnn.com/2009/02/27/magazines/fortune/obama_budget_tax.fortune/index.htm?postversion=2009022717
|2.27.09 @ 5:57PM|#
revenues could be raised by ending the policy of excluding
the value of employer-provided health insurance from income
taxes.
But the officials emphasized that the administration was not
advocating that option, which not only is anathema to some in
organized labor
No kidding; you'd have to be a United States Senator to have
significantly better health insurance than those fuckers in the
UAW. How would that affect your Adjusted Gross Income?
|2.27.09 @ 6:09PM|#
One approach, backed by George W. Bush, is to allow a standard deduction for medical expenses, whether they're paid by individuals or by employers. During last year's presidential campaign, John McCain suggested a variation on that theme, a tax credit for medical coverage that would go directly to the insurer chosen by the taxpayer.
Both of which are reasonable compared to the current system, and
allow at least a fair amount of choice. As opposed to taxing
everyone to pay for the universal government care.
And boy, did Obama run a ton of nasty ads about McCain threatening
to "tax health insurance for the FIRST TIME EVER" around here.
Sanctimonious liberal|2.27.09 @ 6:16PM|#
The government is better suited than individuals to determining which causes should be supported. Therefore, it is necessary to punish private donations in order to generate more tax revenue to make public donations (after skimming off administrative fees first).
Max Rosett|2.27.09 @ 6:18PM|#
Much of what I'm saying is rehashed from a blog post I put up a
couple days ago.
There is something really perverse about the government involving
itself as an intermediary in charitable giving. Obama is taking
something that Americans have always done extraordinarily well on
their own, and making it part of government. The concrete impact of
changing the tax code might be fairly small (aside from triggering
a decrease in charitable giving), but something about the mindset
that this change suggests deeply disturbs me.
Obama seems to anti-success. We know it from "share the wealth,
Joe" and now we're seeing it with his soak-the-rich tax policies.
Apparently there's an upper limit on how much you should be allowed
to succeed. In the same health care proposal where I saw this
change in the tax code, I also saw a proposal to "increase the
availability of generic drugs" (or something to that affect), which
I assume means weakening patents. Apparently a company should only
be able to make a little bit of money off the lifesaving drugs that
they spend billions of dollars to produce.
No Name Guy|2.27.09 @ 7:29PM|#
Classwarrior
That it isn't perfectly progressive - so what? Besides, we're
talking about FEDERAL taxes here. Sales and property taxes are
STATE or LOCAL taxes. Besides - how many bums actually pay property
taxes? Yeah, thats right.....NONE. Also, at least here in
Washington, a lot of necessities (food, for example) are exempt
from sales taxes.
CNN Money had an article on the HENRYS on 10/27/08 that I just
happened to save the graphic from. The lowest paying - those making
between 1 and 50k a year, pay, on average, 13.4% of their income
(oh yeah, this is 66% of the taxpayers, paying all of 8% of the tax
burden). Those making 500k to 1.5 mil pay, on average 36.0% of
their income (0.5% of the tax payers picking up 14% of the burden).
The percentage drops from there, but the richest - 5 million plus a
year, still pay 21.1% of the income - an average of 3.2 million a
year in taxes. In my book, that's enough for any one person to
pay.
Also, those richest, who are the top 0.03% of taxpayers, pay 13% of
the total income taxes paid. That's a big enough share (says the
person in the 50 to 100k group that not quite pays it's own way
being 22% of taxpayers paying only 18% of the total tax
burden).
Oh yeah - on the taxing health care: 'Bout time, not that I agree
with paying more in taxes. But if it gets my stupid union (SPEEA)
to allow us young, healthy types to choose to pocket some cash in
exchange for a high deductable plan, I'm all for it.
|2.27.09 @ 9:48PM|#
Astroglide, I am predicting the opposite. The economy is going
way deep into the crapper. Many here will argue that Obama's
strategies will exascerbate the problems. The repubs are going to
fight these things. There are many millions of new voters and many
of them will benefit from the gubmints generosity. These voters,
many of them too stupid to recognize a decent home loan, will blame
the repubs for the worsening economy. They will punish the repubs
in 2010 for impeding the economic rebuild of Obama. The
U.S.congress will be left with no more than 50 republicans and The
Obamachine will march on long after he is done with his 8
years.
That is my official prophesy.
|2.27.09 @ 11:36PM|#
Holy crap... why did I get out of academia... I thought the tax code was already screwed up enough.
|2.28.09 @ 12:33AM|#
Which is why they will probably hide it on the employer side
of things.
So every tax increase on the wealthy is an excuse for extortion. I
just love the market! Does the market take into account a majority
of participants who are fed up with never seeing an increase in
wages despite rising productivity, despite vast increases for their
employers? (until now, that is)
|2.28.09 @ 4:12AM|#
What about the elephant in the room here? Health insurance is exempt compensation not just for income taxes, but also for FICA. If you make health insurance into regular compensation that's a huge increase in payroll taxes going to the Treasury.
|2.28.09 @ 4:14AM|#
Does the market take into account a majority of participants
who are fed up with never seeing an increase in wages despite
rising productivity, despite vast increases for their
employers?
No, since that's not true.
Anonymous|2.28.09 @ 4:29AM|#
Tony,
If that were true, what's stopping a competitor from bidding a
higher price and attracting those dissatisfied employees?
If you said "government," you're right!
Starboard|2.28.09 @ 10:57AM|#
"When these are factored in, the total tax paid as a percentage
of income is often lower for the wealthy."
$25,000 is still more than $10,000 you stupid prick.
MJ|3.1.09 @ 8:55AM|#
"The equity argument here is questionable, since the reason
high-income people get "a bigger tax break" is that they pay more
in taxes to begin with, not just in absolute terms but
proportionally."
This is the entire basis of of the Left's argument against lowering
tax rates as Bush did. The progressivity of the tax code should
only work one way to the left: up. The Left argues that lowering
taxes through cutting rates or deductions should be proportional or
better, regressive, effectively saying that whomever they currently
define as the "wealthy" should never get a tax cut.
It does not make sense, but the progressives are not known for
their keen grasp of logic.
MJ|3.1.09 @ 9:55AM|#
"Does the market take into account a majority of participants
who are fed up with never seeing an increase in wages despite
rising productivity, despite vast increases for their employers?
(until now, that is)"
Yes, the job market is amarket like any other. Employees are free
to try and sell their services to other employers who will give
them a better deal. The problem you are having is that you seem to
think that the price of labor should have a direct connection to
productivity. Unfortunately, supply and demand also factor in. This
is also true of the products the employer sells in retail. If a
company can all of a sudden make 10x more of their widget, they may
have to lower their price per unit to sell all of their new
production.
|3.1.09 @ 3:13PM|#
If you wonder why we are in the crisis we are in, why your
country is no longer recognizable, why individuality and success is
now a crime, and why your freedom is under attack, you must watch
this video from the 1980s by a KGB agent who explains why and how
it all happened.
http://atlas.victimofcapitalism.com/x/vq/24
"Simply because the psychological shock when they will see in [the]
future what the beautiful society of EQUALITY and social justice
means in practice, obviously they will revolt. They will be very
unhappy [and] frustrated people, and Marxist Leninist regime does
not tolerate these people. Obviously they will join the [ranks] of
dissenters; dissidents."
|3.1.09 @ 5:33PM|#
Doesn't this break his promise not to increase taxes one thin dime on people who make less than $250K?
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