If the Obama plan stays as is, the tax burden of an individual owning a small S corporation with taxable income of $250,000 (including personal income and corporate profit) would jump from 33 percent to 39.6 percent, or $16,500, which is 6.6 percent of the household income and close to the average of what these households now give to charity – $20,500.
To the plan’s supporters, this is only fair since they are in favor of redistribution of wealth … in this case, from successful and generous households, away from charity and to the government.
It is laughable to think that the government can do a better job of serving the poor than organizations like The Salvation Army or the myriad of other charities that do so much with so little.
So the Obama administration wants to decrease the charitable deduction for these households, limiting it to 28 instead of 33-35 percent while increasing their tax burden to 39.6 percent. That would be a perfect storm brewing for the undermining of the charitable sector … and the certain demise of some charities.
The Center on Philanthropy estimates that these moves would decrease charitable giving by about 2.1 percent, which would have meant a decrease of income to charities in 2006 (the last year for which we have data) of almost $3.9 billion. In other words, they would hinder the most generous Americans from doing what they should do – share generously with those in need through a charity that specializes in the service it provides.
None of this should surprise us from leaders who have never supported charities in the first place. From 2000-2004, President Obama gave less than 1 percent of his income to charity and only in the last few years has he given around 5 or 6 percent, according to IRS figures. Then there’s Vice President Joe Biden, who continued a decade-long trend in 2008 by giving less than 1 percent of his income to charity – he took a charitable deduction of just $1,885, including $550 for donating clothing to Goodwill Industries, on income of $269,000.
This tax plan shows contempt for those who have labored in good faith, believing they would reap the rewards of their hard work… the very men, women and families who form the backbone of charitable giving in America.
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