Obama Tax Proposal to Stifle Charitable Giving

[windcatcher]

According to the OMB, the right is again twisting the facts and not telling the whole story.

1. The code favored the rich by giving them a greater deduction than you and I who get a 15% deduction.

2. The increase doesn't take effect until 2011 which we hope is after the recession.

http://www.whitehouse.gov/omb/blog/09/02/27/TheBudgetandCharitableDonations/



So what you're not being told by all the conservative blogs is this measure serves to make the tax code more equal because it means the rich will get a 28% deduction while you and I remain at 15%.

No! Indeed I disagree. If at $20,000 annual adjusted taxable income, I'm allowed to deduct a maximum of 10% if given to recognized charity but I will pay 15% tax on total income:
But a person making $250K annual adjusted taxable income is allowed to take a charitable deductions totalling up to !0% of income, but is taxed on income at 30%, You have the following:

$20k owes tax of $3K w/o deductions. 20k keeps 17k to live with.
$250k owes tax of $75K w/o deductions. 250K keeps 175K to live.

But both tithe 10% to charity. What then?
20K becomes 18 adjusted, tax is 2.7K and keeps 15.3 to live.
250K becomes 225K adjusted, tax is 67.5K and keeps 157.5 to live.

This is assuming that the adjusted income remains in the same tax bracket before and after adjustments.
Both persons had a significant reduction of income by taxes and charitable deductions. 250K was left with 63% of his income. 20K was left with 76% of his income.

As the income rose, so did the taxes against it and so did the importance of taking every available deduction to reduce tax liability while trying to make the money count. Giving to charity comes out of income and income is reduced. But the discretionary margin for giving to charity is much less in lower income than with the higher income. But because the higher income bracket can benefit from investments which produce deductions but promise income growth.... there is less incentive on the purely secular plane, to give to charity. Why would you wish to change what little 'return' they might get if they put their money where it will help someone else and have no control once it leaves their hands.....just because they are 'rich' by comparison with your income?

It is so strange to me that some would prefer the government take their money for government funded services (socialism) than to trust it to charity: They'd prefer that they and others were taxed and that the government continues in its inefficiencies than to keep it in their own possession and dispose of it in charitable giving where they see need and efficiency. Perhaps they just don't like the idea of personal involvement and are willing to miss the opportunity of knowing up front that they participated in a 'good'.

 

[windcatcher]

Should the federal government incentivise charitable giving anyway? Is that their role?

A fair and equal response is should the government be involved at all in charity/social services?

Both are all about control:
If government can eventually undo all truely humane charitable endeavors or reduce them to obsurity and want.... then the government will have total control for benevolence to the needy. What then the government decides to service will receive services and whom ever the government deems as denied can be denied....... and government has its own waiting and procrastinating times..... like authorizing disability which would qualify a person for health services being reviewed and reviewed again...... until the person finally dies and thereby ceases to be an applicant.

With government already involved in the incentives for charity...... it has given government the authority to choos what it recognizes as a charity and to review performance data and to make political judgements or place pressures upon those organizations whom it will.

Either way, it is all about control. But the fairer of the two, is the charity or church through which a person may feel they are more accountable to God and it may bring God glory in the stewardship of their monies instead of the government taking it from them and giving it to others in its own name.

 

[billwald]

The discussion and the proposal both sound goofy. Someone confusing deductions and tax credits? Last I knew, one could deduct up to 50% of one's income as a contribution to a 401K charity.

If one's marginal tax rate is 35%, then the deduction is worth 35% on those dollars (not the entire income) if you are still in the 35% marginal tax bracket after the deduction. If your marginal tax rate is 28% then the deduction is worth 28% on those dollars. Why should it be any other way?

 

[just-want-peace]

--but it's not like they're using the money for food stamps or some other social waste that helps the lazy and lame.... :thumbs:

As the old saw goes: "Even a blind pig will find a few acorns!"

I do believe that LB has found "his" few acorns!:thumbsup::wavey:

 

[windcatcher]

The discussion and the proposal both sound goofy. Someone confusing deductions and tax credits? Last I knew, one could deduct up to 50% of one's income as a contribution to a 401K charity.

If one's marginal tax rate is 35%, then the deduction is worth 35% on those dollars (not the entire income) if you are still in the 35% marginal tax bracket after the deduction. If your marginal tax rate is 28% then the deduction is worth 28% on those dollars. Why should it be any other way?

To my knowledge charitable deductions are not to a 401K which is a retirement savings program.
But charitable deductions have a ceiling based upon percentage of gross income which are allowed which means...... one person can chose to give more but using it to reduce their income is not allowed ........unless there's a provision for carry-over excess into another year which I don't know of.

Those in a real low income bracket are not likely to benefit from itemizing deductions which includes charity deductions, unless they have extremes of medical expenses or mortgage interest payment which make it total over the standard deduction option. That means the sacrifice of the widow's mite is very real..... But then the widow is depending on her blessings to come from the LORD and not the government!

The higher income bracket are not getting a tax credit: They use their deductible expenses to reduce or 'adjust' the income on which they are taxed. If this drops their income into a lower tax bracket its all the better for them: But it is on the income after taking the deductions. However, to have this 'advantage' means they also had to give to get: To rightly compare the tax advantage would require before and after tax computations to include the before deductions and after deductions. But the idea that charity doesn't come out of their income is wrong. In a sense...... even if they give more than a tax deductible ceiling allows..... there is no necessity to report all that they give which exceeds what the tax code allows..... unless they wish to document, chiefly for stastical purposes, but perhaps also for a backup accounting should some of the charity deduction be denied.

A tax credit is taken off the tax liability at the end of the form. A deduction is used to adjust downward the income before fitting into a taxable bracket. Or at least it used to be this way .....back when I fooled with my own tax forms.

And, it is true that those who have less disposable income often have fewer deductions to benefit by taking them. That is where the 'standard deduction' comes in. Whether or not a person in a low income bracket has anything to deduct....... it is like recognizeing that they actually do have some expenses which could be deducted but are too small to justify the accounting time and expenses to claim them. Ergo, the widow's mite is counted when within the standard deduction.

 

[LeBuick]

No! Indeed I disagree. If at $20,000 annual adjusted taxable income, I'm allowed to deduct a maximum of 10% if given to recognized charity but I will pay 15% tax on total income:
But a person making $250K annual adjusted taxable income is allowed to take a charitable deductions totalling up to !0% of income, but is taxed on income at 30%, You have the following:

$20k owes tax of $3K w/o deductions. 20k keeps 17k to live with.
$250k owes tax of $75K w/o deductions. 250K keeps 175K to live.

But both tithe 10% to charity. What then?
20K becomes 18 adjusted, tax is 2.7K and keeps 15.3 to live.
250K becomes 225K adjusted, tax is 67.5K and keeps 157.5 to live.

You're trying to combine actual dollars to percentage of taxes. 10% is always the same no matter how much you make. It only seems more because you have more.

I never said I was in favor of the plan but I do think health care needs to be addressed in this nation. I like Obama's idea during the campaign of letting American's enroll in the same programs congress has. We could then take medicare and use it as co pays and premium's for the seniors and the rest of us could get affordable insurance. The problem with this is all medical plans are not available to congress so those would be forced out of business. However, I have no sympathy for cobra with the rates they charge...

 

[LeBuick]

The discussion and the proposal both sound goofy. Someone confusing deductions and tax credits? Last I knew, one could deduct up to 50% of one's income as a contribution to a 401K charity.

If one's marginal tax rate is 35%, then the deduction is worth 35% on those dollars (not the entire income) if you are still in the 35% marginal tax bracket after the deduction. If your marginal tax rate is 28% then the deduction is worth 28% on those dollars. Why should it be any other way?

Because it unfairly says the more you make the more your dollars are worth.

 

[LeBuick]

As the old saw goes: "Even a blind pig will find a few acorns!"

I do believe that LB has found "his" few acorns!:thumbsup::wavey:

That was actually sarcasm... :thumbsup:

 

[Steven2006]

This rather suspicious attitude is not necessary. People have to live by a budget.

I really don't understand your comment with regard to my point.

 

[carpro]

A past prediction:


http://philanthropy.com/news/update...d-increased-giving-in-an-obama-administration

November 05, 2008

Charities Can Expect New Regulations and Increased Giving in an Obama Administration

By Peter Panepento

Charity leaders can expect President-elect Barack Obama and Congress to push for changes in the federal tax structure that could spur giving and add new regulations for charities and donors, tax experts say.
With Mr. Obama and Congress facing a recession and grappling with establishing a new strategy for the war in Iraq, those changes aren’t likely to come quickly. Nonetheless, they could be significant.

One of the key pieces of Mr. Obama’s tax platform during the campaign — a pledge to roll back some of the tax cuts extended by the Bush administration to those earning more than $250,000 annually — would probably increase charitable giving among wealthy donors by 4 percent to 8 percent according to Roberton Williams, principal research associate at the Urban Institute and the Brookings Institution’s Tax Policy Center in Washington.

SNIP

Mr. Obama will probably hold off on proposing a tax increase on individuals during a recession. Instead, he is likely to wait until the economy improves before pushing ahead.

:laugh:

Yeah. Right.

Shoulda, coulda, woulda, but didn't.

It would have made far too much sense for a socialist like Obama.

 

[StefanM]

I'm torn. On one hand, I fear it may reduce charitable contributions.

On the other hand, I think someone who donates money for a tax deduction is financially stunted. Why give away 100 dollars to avoid 35 in tax?

What this may do, however, is dramatically increase the amount of donations immediately prior to the tax change!

 

[LeBuick]

A past prediction:


http://philanthropy.com/news/update...d-increased-giving-in-an-obama-administration

November 05, 2008

Charities Can Expect New Regulations and Increased Giving in an Obama Administration

By Peter Panepento

Charity leaders can expect President-elect Barack Obama and Congress to push for changes in the federal tax structure that could spur giving and add new regulations for charities and donors, tax experts say.

:laugh:

Yeah. Right.

Shoulda, coulda, woulda, but didn't.

It would have made far too much sense for a socialist like Obama.

Shows how wrong those right wing pundits have been... Not sure why you keep reading them... :laugh:

 

[windcatcher]

The amount of write off allowable to deduct from taxes in the past, was just enough to encourage those who give to continue to give, and to record it on their taxes.... particularly as their income rose. It was not sufficient incentive of itself to encourage all people to give. There might have been a time when the tax code allowed people to report higher amounts.... I don't know. I really don't know what the tax code says now.... as my income has almost always been too small against what few deductions I could claim that the standard deduction worked fine for me.

But if one wishes to consider what some call the "filthy rich".... folks like the Buffets, the Gates, and the Rockefellars, etc. .......they probably have avenues of forming their own foundations which amount to tax write-offs which exceed the deductible limits which the tax man would allow for most of the rest of us givers, and yet are directed to some pet project which, in a covert way, functions to promote their own agenda.

When your rich enough, and powerful enough, you can do pretty much what you want. If your in a position to investigate and expose the cheats then you'd better pick your targets very carefully. Careers, reputations, and even lives have been lost to those who invade the sanctity of the elite puppeteurs who really pull the strings and are a part of the brother hood of darkness.

If one notices carefully, the tax form can serve as a way of collecting all sorts of data on an individual from which some profiling may be done without the filer being any the wiser. Also, the tax form gives the tax man....... and the private bank which he supports (the federal reserve), a set of data from which economic, education, career strengths and development, proportion of businesses in type and service, whether productive or not..... an accumulation of data more flowing and connected than any 10 year census could amass with trends. Who can best be served by such accumulation? Those involved with banking, investment, and finance. Who are least served by the data they collect? The individual filer who must pay his taxes and when he starts his own business or invests his own money, is doing so with only his intuition, and knowledge of what the media is given to report.