By Marta Mossburg
This Christmas season everyone should be up in arms that the president and Congress may cap charitable deductions.
Charities are very concerned and sent 250 representatives to Washington earlier this month to talk members of Congress out of one of the worst ideas to help avert the fiscal cliff.
Giving is not a loophole like accelerated depreciation of corporate jets. For starters, the ability to deduct gifts to charity has been around for almost 100 years. The fact that it was included in the tax code just a few years after the federal income tax was established points to the fact that it was a respected American practice and not added so that friends of those in power could escape government obligations like in this lobbyist-fueled government era.
As Alison Hawkins, director of external affairs at The Philanthropy Roundtable said, “Taking $10 that I could have spent on myself and instead giving it to the community … is a very expensive tax loophole.” Sure, there is some tax benefit to that, but it would have been a lot better financially for a person to keep his or her money and pay taxes on it.
Besides, it is a terrible idea to discourage Americans from giving back to the community at a time when government of all types is increasingly replacing the work civil organizations used to provide and when so many need a job and are struggling.
And a cap means that charities that depend on government for their existence will have more of an edge fundraising if private giving goes down as a result of tax changes.
But it’s revealing that we have reached a point in our culture where a deduction for giving to charity is considered a “loophole” just like accounting that can allow oil companies, for example, to buy crude at a range of prices but pay taxes on their profits from selling it as if every barrel was bought at the latest, most expensive price.
The president, who has tried to cap deductions with practically every bill he has submitted, and a willing media are chief proponents of branding giving as a vehicle for the rich to avoid paying their fair share. But that label is patently unfair. Studies show middle-class Americans donate a larger percentage of their income than the wealthy, with religious faith being a significant driver of a lot of giving.
And interestingly, liberals give less than conservatives, so any changes would disproportionately impact those who voted for the other guy in the last election.
Some charities, perhaps unwittingly, have done their part to remake themselves as just another special interest in the eyes of the media by employing high-priced lobbyists. That smells on the face of it and many donors won’t give to those groups because of it.
But it is like faulting charities for the fact that the government is huge and complex. They should have the right to navigate it, too, like everyone else. Besides, the vast majority do not have the money or resources to petition Washington just like small businesses, which need every employee focused on making money to survive.
Ultimately, it would be best to get rid of all deductions, simplify the tax code and broaden the tax base. That would benefit charities and everyone who cannot afford to pay lobbyists to manipulate the tax code in their favor. Data from Giving USA buttresses that viewpoint. It shows that donations have hovered around 2 percent of disposable income for decades under different tax regimes, signifying that expanding the pie is the best solution to increasing donations.
But that does not mean in the interim that Congress should treat the broad swath of Americans who give as if they were serial tax avoiders like General Electric. It’s a dangerous moral equivalency that undermines civil society and makes government a bigger arbiter in deciding Americans’ priorities.
Marta H. Mossburg writes frequently about national affairs and about politics in Maryland, where she lives. Read her at www.martamossburg.com.