Sunday, March 01, 2009


The director of OMB puts this forth as a reason for limiting charitable deductions by rich people:
Third, there’s a question of fairness. Non-profits play a critical role in our society (indeed, I have worked at several of them in the past). But let’s look at how the tax code treats two different contributors to a non-profit. 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. 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.
That makes no sense. The only way that Bill Gates would get a larger deduction would be if he had paid that higher amount in taxes in the first place. Fairness and equal treatment would demand that anyone who donates $1,000 to a charity no longer has to pay taxes on that $1,000; and if some people had paid a higher portion of that $1,000 in taxes in the first place, then of course they would get a higher deduction. Under the new plan, though, some people will still be taxed (albeit at a reduced rate) on the same $1,000 that they donated to a charity.

UPDATE: I'm aware, of course, that current policy already includes limits on total charitable deductions, a phase-out of itemized deductions for higher incomes, etc. But I'm not sure why making it even harder for wealthy people to give their money away is an example of "fairness."


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