(An example: A person who donates $10,000 will only have a $2,800 deduction on his/her taxes instead of a $3,500 deduction)
Obama, however, states that the charities would "do just fine" with a 7% decrease in tax breaks since this reduction will only affect the taxpayers earning more that $250,000. He says that this 35% tax break is available only to the extremely wealthy. The Center on Philanthropy at Indiana University states that this reduction would "boost federal revenue by billions of dollars."
So what do you think is more important? Should donating a considerable amount of money to a charity allow you to have a 35% tax break or should this percentage be lowered?
Also, do you agree with the charities that say that tax breaks are huge incentives for people wanting to donate? Will a reduction in tax breaks cause a dramatic reduction in the amount of donations?
5 comments:
I think that it's reasonable for the tax cuts to be lowered given that it is already only available to the extremely wealthy. If someone has enough money, I should think that they will still have the same incentive to donate (to do good rather than for something in return). This reduction as Pritika said will also help federal revenue by billions of dollars. In certain aspects though, I do agree with the charities that say that tax breaks are huge incentives for people wanting to donate. Although, we hope the wealthy are donating for the good of others, it's inevitable that some wouldn't without something in return--a tax break. However, again, I don't think that a reduction in tax breaks will cause a dramatic reduction in the amount of donations given that the people who are donating are really well off.
I think that this tax break reduction is a bad idea. Although the article states that the last reduction didn't have a direct impact on the number of charitable donations made, I still think that reducing this tax break even more will take away a large incentive for people to give money. I also think that it's in the government's best interest to encourage charitable donations even if that means that the money is not going directly to hands of the government. Giving money to a non-profit goes to community building, education, environmental work, etc. All are areas that, if left ignored, can seriously hurt the country in the long run. Without educated citizens and strong communities, there will be more crime and more people with lower paying jobs or on government welfare who will not be able to contribute, or who will be taking away from, government resources. If individual organizations aren't cleaning up messes and preventing further harm to the environment, someone (the government) is going to get stuck with it. I don't propose basing our entire economic policy off of this idea as I did running for president on the Independent Party ticket in our simulation. However, it is worth considering that even if the government doesn't get more revenue in the short term, they may have to pay a high price for the damage it will cause in the long term.
I am most confused as to why those making over $250,000 get a larger tax deduction for the same charitable contribution than would some one less well-off. If the government gave middle class donors a bit larger tax deduction and wealthy donors a bit smaller tax deduction would that be terrible? It would seem that people with slightly lower income would be more incentivized by the prospect of lower taxes anyway. This is tricky because some nonprofits are probably more efficient than the government programs for which the increased tax revenue would increase funding, but some nonprofits are less valuable.
If the highest echelons of society are upset over a 7 percent decrease in tax deductions for charity, then I would have to make the presumption that they have less interest in charity and more interest in tax deductions. If a person has $10,000 of disposable income that he/she chooses to donate and he/she is disincentivized by a $700 change in tax credits, is such a person truly interested in charitable donations? Moreover, assuming this person has over $10,000 in disposable income (or that he/she is choosing to spend all of his/her disposable income on charity in which case I would assume he/she would be bothered by the tax change), a difference in $700 is relatively small. As a blogger in the economist recently conjectured, a $1 increase in taxes does not mean that charities will receive $1 less in donations. (http://www.economist.com/blogs/democracyinamerica/2012/02/taxes-and-charity).
In my personal opinion, the spirit of charity is to donate and do good for the sake of doing good. The fact that the government gives tax deductions for charitable donations means that, in a sense, the government is indirectly subsidizing charitable organizations. I agree that charitable organizations are a worthy cause to receive government help. However, if I were to take the extreme right-wing, pro-business, and capitalist view, I would say that any organization which is unable to survive financially without government assistance is just being weeded out by the tendencies of a capitalist society.
It seems Andrew said the majority of my thoughts in his comment.
I might add though, that this relates to the continuing debate over tax loopholes for the rich. Tex-deductible charitable donations can be one of those loopholes, especially when wealthy individuals make much of their money from investments, leading to any tax-breaks on their income having a larger effect.
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