Ok. I'm sorry. You would think one quasi-political post in a month's time would do it, and I'd get back to software and ordinary geek-stuff. But I'm going to gently rant.
The White House Director of OMB (Office of Management & Budget), Peter Orszag, had this to say about the pending reduction to the charitable donation tax write off in the new budget: 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.
This proposal walks that difference back some of the way – it would limit the tax benefit for Buffet or Gates to $280. In other words, we are not eliminating the deduction – just reducing it to 28 percent (or $280 on the hypothetical $1,000 contribution) for the 5 percent of families at the very top of the income distribution. That is the same tax benefit that they would have enjoyed at the end of the Reagan Administration.
Obviously this was not written for Gates or Buffet, or even Americans of lesser wealth who are nevertheless big givers with high incomes. They ALL understand what's going on, because they live it at tax time every year. No, this is written specifically for that 50K per year teacher. Or anyone else making less than 250K per year. And here's the kicker - Orszag thinks that we're all idiots.
But, don't take my word for it, read the whole post. Here it is again:The Budget and Charitable Donations
Did you see one word in it about how much more in taxes those big givers already pay?
I know lots of you are already way ahead of me here, but let me spell it out, just because it will make me feel better. If Gates gives $1,000 to the United Way, and Joe Teacher gives $1,000 to the United Way, both Bill and Joe are $1,000 poorer, and the United Way is $2,000 richer.
There's nothing uneven about that.
UNLESS, you are Orszag, and you believe that the money - the $1,000 in either man's pocket - is rightfully YOUR money first. YOU are the government, and YOU have first call on ANYBODY'S money. In that light, his post makes perfect sense. Since all money REALLY belongs to the government, not the people that earn it, the government is free to take as much or little as they want from anybody, any time, at the point of a gun.
Now while as a G man, Orszag knows this is true, he can't SAY it in so many words. It still sounds a little too harsh, too police state, too politically incorrect. He doesn't want to screw up the opportunity for his boss to be re-elected. So he says the word 'tax break' and pretends that it has the same value as real money.
But it doesn't, does it? Remember, each man is $1,000 poorer, and the United Way is $2,000 better off.
But Jim, you may protest, I know there must be something too this. He can't be lying, can he?
No, he's not lying. But he is relying on the fact that you're an idiot. He hopes like hell that you believe this crap about "walking the difference back" because it sounds like he's making it more equitable, making everything the same.
I've got an idea. In the interest of fairness, here's another way we could make it the same. Let's reduce the top tax rate to 15% for Mr. Gates. That way, he would only enjoy a tax break of $150 too, the same as the teacher.
Don't hold your breath.
Despite my rant about this, they'll probably get away with this. And here's where it is really going to hurt charities. Say it's not Gates, but a $450,000 per year family of six, with two kids in college, that gives 10% annually to Joe's charity. Bush Tax Rates & Charitable Deductions:
· $450,000 income
· ( $45,000) charity
· ($113,325) tax burden
Net for the family after charity and tax burden: $ 291,675
Obama Tax Rates & Charitable Deductions:
· $450,000 income
· ( $45,000) charity
· ($120,721) tax burden
Net for the family after charity and tax burden: $ 284,279
So how does our hypothetical family get back their $7,000? By reducing their charitable giving, of course. If they give only $35,000 to charity, then the numbers work out this way:
Obama Plan after reaction to policy
· $450,000 income
· ( $35,000) charity
· ($123,521) tax burden
Net for the family after charity and tax burden: $ 291,479.
Roughly the same as it was under Bush. So Mr. Orszag is happy, since he gets 10K more for pork funding. The family doesn't feel great about things, but at least they can still pay for tuition (no financial aid for them) and their mortgage (glad somebody can.)
Who's the big loser here? Joe Teacher. Because he thought that things were going to even out. What really happened is that charity that he likes - the one he gives his very hard-earned money to - they can't do as much as they used to do. So ironically, they ask for more from Joe.
