Tuesday, April 7, 2009

Give until it hurts

I just got back from maternity leave. A long maternity leave. While I was out, we elected a new president, bought an 80% share in AIG, and the national unemployment rate increased from 6.2% in August of 2008 to 8.5% in March of 2009.

I am easing back into the particulars of my job, one of which includes contributing to our blog. I set up a few Google news searches, and I comb through about seven emails a day, linking me to news stories from all over the world that relate to issues we consider important at my center.

Apparently, the world is going to come to an end due to a “cap” being placed on charitable giving.

I guess this “cap” would make rich people give less to make up for the hit on their tax bill, thus taking money out of the coffers of charities. Nonprofits that provide essential services will collapse. Charities will suffer. Those in need will continue to fall by the wayside.

It all seemed a little alarmist to me, so I spent some time doing some reading, from Colorado Springs to Kansas City, Louisiana to West Virginia, it’s a bustling topic.

First of all, I wondered, “What’s really happening?”

Donors making over 250 thousand dollars (adjusted) who have been enjoying a 35 percent tax deduction will see that deduction reduced to 28 percent, starting in 2011, returning them to the rate they paid when Ronald Reagan was president. The revenue generated from this deduction reduction would be used to form the basis of a health care reform reserve.

A couple of notes: this affects taxable income, which is lower than total income, and taxpayers at higher incomes have access to more deductions, exemptions, and breaks. This budget includes limits to values on all itemized deductions for the top two tax brackets; it’s not “picking on charitable giving.”

As with almost anything, you can find data to support every side of an argument, sometimes from the same institution. Furthermore, you can manipulate language, making a situation sound like doom reeking from the mouth of hell or a bed of roses, depending upon your desired result.

This is what I found most interesting in my reading: how the debate is shaped in the political arena, and how citizens and organizations respond. Information is at our fingertips, but does that mean that we seek it out? Or do we operate in an echo chamber, only searching out that which supports what we want to believe?

I see this as a tax debate, not a human services debate. The fact that the GOP is framing it as a human services debate is one thing that led me to this conclusion. They have spun what they perceive as a tax increase on the wealthy into a social welfare issue, couching their arguments in terms of human need. It’s also about who provides services, nonprofits or the federal government. If anything, this debate emphasizes, again, how rhetoric is used to shape public opinion, and how easy that is to do when it comes to tax and class issues in America. It's "class warfare" when we want to "raise taxes" on the rich (Their rate was 50% under Mr. Reagan, by the way. The "trickle" seems to have defied gravity), but it's not class warfare to cut benefits to the poor. Robin Hood is only a hero in the collective subconscious.

It's great. By using just a few of the facts and leaving out a host of other relevant information, you can really get people riled up.

Statements like “putting a cap on charitable giving” and “penalizes charitable giving” or “Charitable giving could be under attack by the federal government” turn the issue on its ear and drive public opinion.

This is not a new concept.

If what is being said is true, it presents a cynical view of what causes people to give to charitable causes. It also skews some of the data on where all this money actually comes from. Statistics show that a large share of charitable donations do not show up in tax bills, and aside from that, donors in lower tax brackets account for over half of the donations that are deducted. These people would not be affected by these tax changes.

You can find numbers that forecast a reduction in giving of 1 billion a year, to 7 billion a year. The Center on Budget and Policy Priorities estimates a 1.3 percent decline. The Indiana University Center on Philanthropy estimates that, if these proposals had been in place in 2006, “total itemized charitable giving by households would have dropped by 2.1 percent." Patrick M. Rooney, Ph.D., interim executive director, went on to say that “changes in personal income and wealth, both of which have declined in the past year, have a greater impact on charitable giving than do tax rate changes." In other words, how much you already have, not what you can write off in April, dictates how much you give.

You can go on and on about how President Obama clearly hates the rich, and does not believe in all he said about the importance of charities, but he must be suffering from self-loathing as well, because he’s “raising taxes” on himself. Everyone is not hurting in this crisis. The rich, who have gotten richer in the past few decades, are still rich. I suppose it's all relative, like when Ken Lay had to sell a few of his homes.

What I want to know is, will we see a flurry of giving in 2009 and 2010 while the wealthy can still take advantage of the existing rate?

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