When it comes to government’s role in the American economy, we’ve become accustomed to ideas that seemed incredible not long ago—whether public ownership of General Motors or infusions of cash into major banks. But government takeover of private charity? It’s not entirely far-fetched. The stars are aligning for government to capture funds that would otherwise have gone to philanthropy and for government itself to pick charity winners and losers. The result could be a more bureaucratic, less innovative non-profit sector.
Change is happening in three big ways which threaten to combine to increase government influence over both funds and labor.
Little-noticed in the discussion of the Senate Finance Committee health care bill was a proposal floated by an influential group of Democratic Senators (including West Virginia’s John D. Rockefeller IV and Massachusetts’ John Kerry) to quietly raise additional billions in taxes by limiting the value of itemized deductions—such as contributions to charity. The proposal would hold steady the deductions’ value (at 35 cents on a dollar) even as the top tax rate rises in 2011 to more than 39 percent (as the Bush tax cuts expire). When a similar proposal was advanced early this year by President Obama, the long-time head of the National Bureau of Economic Research, Martin Feldstein, estimated it would lead to a $7 billion drop in charitable giving. Such a fall would compound big losses that have already hit charities; the Chronicle of Philanthropy reports that six of 10 United Way chapters saw a decline in giving last year, totaling $4 billion. Although Americans donate about $300 billion in total annually to charity, these sorts of hits are not small change. As a coalition of 15 major charitable organizations put it in a letter Finance Committee chairman Senator Baucus, “Charities have seen an increased demand for their services as individuals and families struggle with financial uncertainty.”