The Washington Examiner takes a closer look at President Obama’s latest stimulus bill.
A significant portion – $400 billion over 10 years – of President Obama’s jobs bill is apparently funded through the limitation of itemized deductions for the “wealthy.”
This proposal would create a perfecta of unintended public policy consequences.
First, taxes for wealthy philanthropists would go up while taxes for wealthy Scrooges, those who make no charitable contributions, would remain virtually the same.
Second, if the philanthropists decide to reduce their philanthropy because of the additional taxes due, charities would have less revenues and would need to contract their charitable missions. Not good.
Over the years, the Internal Revenue Code has been amended and amended again. These amendments have severely reduced or eliminated the availability of most itemized deductions for the “wealthy.”
The article explains how the current tax code limits the wealthy from claiming most tax credits that are available to lower and middle income earners. The only tax credits that the wealthy can use are the mortgage interest deduction and the charity deduction. Whatever taxes that Obama wants to raise before he can raise the income tax brackets will have to come out of those two credits.
The article continues:
The home mortgage deduction is currently limited to the interest on a $1 million mortgage. With interest rates at 5% or so, the maximum tax increase related to home interest for any individual taxpayer from the proposed limitation on itemized deductions would approximate only $3500.
Therefore, the expected increase of $40 billion dollars a year in federal revenues for the next decade must be funded from “wealthy” individuals losing a portion of their itemized tax deduction resulting from their charitable contributions.
Consequently, we get to this unusual social result. If a “wealthy” philanthropist donates $1 million dollars to the Red Cross in 2012 and then does so again in 2013, his or her taxes would increase by $70,000 in 2013 over 2012.
If the “wealthy” next-door neighbor, Scrooge, made no charitable donations in 2012 and continued that pattern in 2013, Scrooge’s taxes would not increase in 2013. Now there is a piece of public policy – let’s raise taxes only on the good guys!
Most ‘wealthy’ individuals donate to charity only after determining how much they can afford in after-tax dollars. One has to think that the practical result here is that many, if not most, “wealthy” taxpayers would reduce their contributions to achieve the same after-tax cost of their charity.
So, by raising the taxes on the “wealthy” philanthropist, the proposed bill would very likely punish the poor by reducing the funds received by the local food bank etc. as large charitable donations decline. It is odd public policy, in troubled times, to propose a jobs bill that would hurt charities and therefore the poor.
This policy of Obama’s will result in a massive cut in funding for private charities and non-profits, including churches. Including churches. But that is exactly what a secular leftist like Obama wants. The state has to be everything, and all rivals to the state must fade away. The family has to be destroyed, and the church, too.