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. How dare he limit tax deductions for charitable giving! They’re afraid they’ll get fewer donations, but they should be more concerned that Mr. Obama’s policies will shove them aside in favor of the New Charity State.
What did these nonprofit liberals expect, anyway? Mr. Obama is proposing a vast expansion of the entitlement state, and he has to find some way to pay for it. So logically enough, one of his ideas for funding public welfare is to reduce the tax benefit for private charity. His budget proposes to raise the top personal income tax rate to 39.6% in 2011 from 35%, and the 33% rate to 36% while reducing the tax benefit from itemized deductions for the top two brackets to 28% from 35% and 33%, respectively. The White House estimates the deduction reduction will yield $318 billion in revenue over 10 years.
This is a subject that has interested me for many years, but I haven’t said much about it. But it’s now or never.
In Marxist states, it was routine to outlaw private charities (although it’s noteworthy that the People’s Republic of China does have them.) That’s because part of the theory of Marxism is that, when history reaches its conclusion and the dictatorship of the proletariat be established, there won’t be any further need for private charity. (I discuss the impact of that relative to a Marxist state in Losing the Church Property, or Why the Romanians Don’t Tithe.) As the WSJ article goes on to point out, European welfare states have for the most part achieved that goal that Marxism aimed for (European nations getting to the welfare state without Marxism was one of Marx’s greatest fears.) There is relatively little charity in Europe; the government is expected to take care of such things.
That being the case–and it also being the case that most liberals these days are committed statists–it would make sense that a liberal administration would want to both raise money and squeeze private charity out by phasing out the deductibility of charitable donations. Moreover, on the face of it it would be a good way to defund churches, especially Evangelical ones, and that’s always a plus for the liberal agenda.
But life is complicated. It’s possible for liberal charities to shift their funding source to the government; same government funds them to some extent already. But even liberal charities like the freedom that comes from raising your own money, and that’s why they are lining up to oppose the reduction in the deductibility of donations for the higher income brackets. (That’s especially important for liberal charities as they draw their funding more from upper income people.)
As the article states, liberal charities will show that they have a great deal of clout on this issue. The Obama administration had better prepare for this, an assault from a normally sympathetic group. It’s ironic that, in doing so, liberal charities will be in common cause with their conservative counterparts, but I’ve always felt that, if the deduction for charitable donations were eliminated altogether, the liberal charities would be hit the hardest. Evidently they think so too.