With the attempt to limit the deductibility of contributions to charities by high-earners, the Obama Administration opened a multi-front attack against the American tradition of “neighbor helping neighbor” and financially successful people turning large portions of their wealth over to charities that improve the American culture in august manners. The governmental power grab competes with the attempts to control the financial sector for its significance and may exceed it in the long-term effect upon our culture.
One first has to marvel at how liberals can twist logic to rationalize a tax increase. It happens regularly from the local government level up to the national level. Does anyone really believe that the cameras at intersections are for driver safety? The politicians preach about how lives are being saved while what they are really doing is extorting more monies for their various projects.
In the same manner, the Obama team worked hard to define their argument to limit the benefit deduction. They outlined three main points. The first is that high-income people should not get greater tax benefit than people taxed at the lower rate of 28%. They then argue the tax-benefit would be the same that was provided during the Reagan era when the top rate for everyone was 28%. These are marvelous twists of semantics that would delight any Orwellian scholar. These assertions beg the question of a lower top rate or a flat tax. The last point they make is just totally bogus and must have derived from some obscure study by a misguided PhD. The President stating with a straight face that tax benefits have little influence upon charitable decisions displays either his naiveté or his disingenuousness.
Republicans fell for a similar argument during the Bush 41 Administration. The Democrats argued for the income tax rate at 31% stating that the phasing out of deductions created a bubble and that certain people were getting an advantage. This new rate would bring everyone to a true 28%; thus equalizing taxes. The Republicans foolishly bought that argument – merely a precursor for the next argument. Not long after, the second step of raising the rate to 31% was argued for because now the top earners were paying a 28% on their top income, and it would only be fair to raise the top rate to 31% for all income. This same convoluted logic will be used as the first step toward eliminating the charitable contribution for everyone.
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