Tuesday, November 20, 2012

Big Government and the Charitable Tax Deduction

The fatalistic conjunction of Super Sandy, President Obama's re-election (whew!) and the fiscal cliff has  put big government and the charitable tax deduction on the board in a way we couldn't have imagined a month ago. Sandy showed both the vibrancy of generous Americans and charitable impulse - as well as the simple fact that private charity, no matter how well intentioned, cannot really function very well in a disaster setting without a supervening mammoth federal. state and local government presence. Government assures adequacy of broad scale effort; charity is at best  interstitial, filling  in the cracks - essential yes, but really quite limited, highly selective, not easily quantified, and pretty much  unaccountable.

A lame duck congress has gathered and must forge a compromise that ideally will address the need to  increase revenues and decrease expenses. As we know mandatory across-the-board cuts, deep cuts, in federal spending  - including the Republican untouchable, Defense - kick in at the end of the year. Everyone  knows the super-rich and the just-rich ($250,000 and up) are favored  in the tax code. Simply put my view is the rich can and should pay more in taxes. There are various ways to accomplish this end. One way is  by capping the charitable tax deduction - a kick in the rubber parts that reportedly will have a profound impact on giving by the very rich.

The usual suspects have already begun a furious lobbying effort to assure that the deduction isn't touched. I'm of course part of the "industry;" I'm on the receiving end of this agitprop and as a matter of self interest I should huff and puff with everyone else. But I'm not so sure. I keep asking myself what is best for the country? What is best for the greatest  number of taxpayers in all brackets? Yes some mega-donations might be  lost or reduced. Would that cost bring a greater social benefit? I don't  like singling  out the charitable tax deduction when the entire tax code is such a dog's breakfast of forgiven revenue - everything from mortgage interest to offshore tax  loopholes, etc. But the prospect of a split congress actually reforming the tax code? That chute won't open. The best we'll get, in my view, is a spatchcocked compromise with most of the inherently bad stuff unaddressed.

If  other giveaways  by the federal tax code are seriously addressed I really can't honestly argue that the charitable tax deduction is untouchable. And I  itemize.

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