Obama redefining “charity” to “government mandate”

The proposed budget by the Obama admin is at least as convoluted as the newly enacted stimulus. And again, what’s actually in it keeps seeping out at a rate slower than Congress acts… in other words, we’re likely to find this law before any one entity or media can actually pour thru all the BS and pork.

And one of those issues is the redefinition of “charity”, Obama style.

By reaching so broadly with his $4 trillion 2010 budget plan, and the giant deficits it will incur, Mr. Obama put his hard-won election mandate on the line, saying if lawmakers want to do big things – from boosting education and clean energy technology to overhauling health care – they will have to find ways to pay for it.

From his plan to cut payments to farmers, which both parties all but ruled out this week, to his goal of a complex cap-and-trade system to control greenhouse gas emissions, lawmakers predicted Mr. Obama will have to survive challenges from political friends and foes alike.

“I work for the American people, and I’m determined to bring the change that the people voted for last November.And that means cutting what we don’t need to pay for what we do,” Mr. Obama said in announcing his budget.

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[below INRE reduction in charitable deductions specifically]

Roberton Williams, senior fellow at the Tax Policy Center, said it’s impossible to calculate the exact effects of all the tax changes, but said the overall result is clear – less philanthropic giving.

“This will lead people to give less to charities if they behave the way they’ve behaved in the past,” he said. “We’ve already seen a drop in giving as a result of the economic collapse. On top of that, this will just reduce the amount of giving.”

Obama’s desperately looking for money. He’s counting on raising $179.8 billion over 10 years by limiting the deductions allowable to 28%… or for every dollar donated, the higher income (or wealthy, as Obama sees them) can deduct 28 cents. This targets couples making $250,000+ or individuals making $200,000+.

This reduces the estimated amount of deductions allowed by approximately 20% – added revenue for Obama to put in the nation’s coffers for health care.

Pardon me, but who does Obama think donates the most in funds to charitable organizations? Take away their financial incentive to donate, and the result will be predictable… less donations. It becomes a vicious circle – less donations, less private and non profits filling a need… which the government then steps in to fill the need.

Suzanne Perry at The Chronicle of Philanthropy had some feedback from some of the nonprofits and charities worried about this move.

“During the current economic downturn, which has forced nonprofits to do more with less, any proposal which would result in a decrease in private giving will be a disaster for America’s charities, and for those who depend upon them,” said United Jewish Communities, an umbrella group for Jewish social-service charities.

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Independent Sector, a coalition of charities and foundations, and the Council on Foundations were among the nonprofit groups that lined up to express concern that the proposal would prompt donors to pull back.

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The top executives at Independent Sector and the Council on Foundations are the latest voices in the chorus of advocates who say President Obama’s tax plan would hamper giving to nonprofit groups and foundations.

“We are opposed to proposals which will significantly depress incentives for charitable giving,” said Steve Gunderson, president and chief executive of the Council on Foundations, an organization that represents grant makers. “In these hard economic times, we need to make sure tax and regulatory policy encourage growth in philanthropy.”

Independent Sector, a coalition of major charities and foundations, said in a statement that the plan would encourage some donors to “cap their gifts.”

“This could be a problem for many struggling nonprofits vital to our communities that are already facing a very difficult fund raising environment,” the organization said.

For the not-quite-as-wealthy, this may not have as much of an impact. But for those in the 33-35% tax bracket… not so.

To illustrate, Mr. Sharpe offers the example of a wealthy donor in the top tax bracket who makes a $100,000 gift. The donor currently would save $35,000 in taxes, or 35 percent of the gift. Under President Obama’s proposal, that same donor would save only $28,000, or 28 percent — a difference of $7,000.

Mr. Sharpe says the proposal would unfairly penalize the most generous taxpayers since wealthy people who give nothing to charity would not face such a tax increase.

Here’s a kicker… Obama, aka Mr. Education… could also be causing severe problems for colleges and universities and academic medical centers.

“It seems like unusual public policy to try, as the president announced to the Congress this week, to return the United States to world leadership in access to higher education and then make it more difficult for extraordinary donors to contribute great gifts to colleges and universities,” Mr. Flessner says.

“Likewise, it seems like unusual public policy to penalize the great medical centers that contribute so much to scientific breakthroughs by making it more difficult for donors to make the six-, seven-, eight-, and nine-figure gifts,” he adds.

Eric Kessler, advisor for Arabella Philanthropic Investment Advisors, disagrees, saying he believes the most wealthy donors were unlikely to change their donation stripes overnight. But he does have concern for the mid-range donors ($1000 range) for whom deductions play a large part in their decisions to contribute. (or… watch PBS donations hit the toilet?)

And a Chicago lawyer worries about fraud and scams.

Michael W. Peregrine, a lawyer in Chicago who advises nonprofit groups, says charities are now facing a “triple play” that could cut into their donations — the bad economy, the proposed charitable-deduction limits, and proposals by President Obama to end tax cuts for wealthy people that were introduced by President Bush.

He says he worries that charities that are hurting for donations will become more vulnerable to fund-raising scams. “What is certain is that the perception that this will reduce charitable donations in the short term is going to draw out the fraudsters,” he says.

I guess he hasn’t looked around his ‘hood lately… they are already crawling out of the woodwork in Chicago.

If this isn’t a deterrent to contribute, it sure isn’t incentive either. But perhaps the most disconcerting is the Obama administration attitude towards reducing these charitable deductions.

According to Obama’s Office of Management and Budget Director, Peter Orszag, the POTUS feels he’s already made that money up by giving government money to the charities in his budget…

“Contained in the recovery act, there’s $100 million to support nonprofits and charities as we get through this period of economic difficulty,” he said.

So there you have it. Instead of “charity” coming from a sense of generousity and humanity, Obama’s idea is to give less incentive for individual or institutional giving, and instead have the lost charitable revenues made up ($100 mil, at least…) by government deciding what charities to donate on everone’s behalf.

This, in itself, is so insulting as to be unacceptable. When I donate, *I* choose the charity of my choice and the cause that interests me. I do not want government making that choice for me.

This is meeting some resistance by both parties. Perhaps it’s thrown in there as a swap meet giveaway. But then it’s not necessarily chump change to lose approximately $18 billion annually in anticipated tax revenues for a fiscal budget, plus projected spending, that already doesn’t add up.

Perhaps Obama feels that taking the tax revenues in lieu of current deductions for his health care will result in a better kind of “charity”. But then, isn’t that for the donors to decide?