Obama, Socialism and Charitable Reductions

In the interest of full disclosure, I did not watch President Obama’s 2010 Budget Press Conference last night. So my reactions are based off of the few comments I’ve heard on the radio and read online this morning. From what I can gather in summary news stories, it appears that Obama has laid out basically what he said he would within his State of the Union address a few weeks ago. Yet one item in particular seems to setting off people on both sides of the aisle though: reducing the amount of charitable deductions for couples making $250,000 annually (or $200,000 for singles annually) from 35% to 28%.

Much of the rhetoric I’ve read or heard this morning from more staunch “right-wingers” are starting to use the dreaded “S” word: socialism. That’s right people! We’re apparently not only on its path but our current President paving a superhighway to the glorious promised land with his left-wing friends. Apparently people believe that one President can undo in 4 years what has been built in the past 222 years since our Constitution was adopted. Within this subtly sly move from the administration, Obama has single-handedly started the first pebble in concerted government-controlled landslide to render all non-profit and private charities pointless. Not only is such an idea reckless, but seems to feed off the harbored fears many within the Republican Party were told about our now “evil” President: namely, he’s a true-blue socialist that would make William Clinton blush. People who buy into such conspiratorial theories will see what they want to see inevitably, but for those you who are interested in separating fact from fiction, know this: That’s not quite what the President is proposing.

According to the Wall Street Journal today, Obama’s proposed tax-cuts merely reduces the charitable deductions to the Clinton years deduction limits. Alan Binder at the Journal explains this a bit better:

As the law now stands, when a family that does not itemize deductions on its tax return donates $100 to its favorite charity, the donation costs the family $100. But when an itemizing family in the 25% bracket donates $100, it costs them only $75 after tax. And when an itemizer in the 35% bracket donates $100, the after-tax cost is only $65. Thus the richer you are, the less it costs. Is it socialistic to say that seems a little backwards?
If that tax treatment strikes you as fair, try another example. Suppose those same three families each pay $10,000 a year in interest on their home mortgages. The cost to the non-itemizer is the full $10,000. For the family in the 25% bracket that itemizes, the net cost after taxes is only $7,500. And for the upper-income family in the 35% bracket that itemizes, the net cost is a mere $6,500. Just imagine a member of Congress proposing a homeownership subsidy like that directly, rather than through the tax code: 35% to the rich, 25% to the middle class, and nothing to the poor. Would anyone support it?

If Obama is doing anything, it appears he’s trying to undo the last eight years from George W. Bush, which for many people wouldn’t be that horrible of an idea. Now if he could just start bringing home our troops.

Posted by Joshua Hynes

This entry was posted on Wednesday, March 25, 2009 at 8:32am. It has been filed under News, Money, Politics, Writers, Joshua.

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