President Obama’s proposed budget is a bold and massive affair which will influence the future of this nation for many years to come. Is it the best thing for the country? No one can be sure. Is there wasteful spending, about equally divided between Republicans and Democrats? Yes. Does it err in its approach to charitable giving in America? In my opinion that would have to be a “yes” as well.
Under this budget, Americans making $250,000 or more a year are going to see the deduction value of their charitable donations go down from 35% to 28%. So, for example, a person making a $10,000 contribution to a charity would, under the Obama proposal, receive a tax deduction of $2800, as opposed to $3500. Does that really matter? It sure does, and not because I worry about the impact of those lost dollars in the lives of those fortunate enough to be in the position to make such gifts. Though, I don’t want to be casual with other people’s money, either.
It matters because just as we are being told that recovery will require an unprecedented partnership between the public and the private sector, the administration devalues individual charity. That is not smart and it is not right. OMB Director Peter Orszag and his crew of what my friend Nathan Diament of the OU’s Institute for Public Affairs calls, the “green eye shade folks” (apparently that’s slang for accountants, and since I just learned that, I thought I would share) really messed up on this one.
It’s not that this change will cripple philanthropy — most studies indicate, it almost certainly will not. But even the results of those studies are questionable. They are based on how donors respond to questions about the importance they place on the deduction which they can take, as a factor which influences their giving. Without doubting the honesty of their responses, I am not sure that anyone will be fully candid even with themselves, about how such ulterior motives shape their philanthropic decisions.
And even if most givers, in reality, do not place great importance on the deductibility of their gifts, the President’s proposed change in the tax code does equate the value of charitable giving with all other deductible expenses. At precisely the moment when we need to reaffirm the importance of individuals stepping up to address those in need, this does the opposite – literally devalues charitable giving, even if it does not threaten to undermine it. Not only is that bad public policy, it undermines the President’s vision for our future as a nation.
As President Obama has told the nation many times, we must not give in to fear in the midst of financial crisis. He is so right about that. So why not do everything in our power to encourage people’s personal generosity at just the time they may feel too afraid to give?