Sunday, December 23, 2012

Today’s Laugh – Reading Wall Street Journal Opinion Piece by Kimberly Dennis Arguing that Charities Should Want Lower Tax Rates and Caps on Deductions

 When the Exact Opposite is True

As the football season winds down and the basketball playoff are still far in the future one remaining entertaining sport is watching Conservatives argue positions using logic that is the opposite of real logic.  Case in point is the issue of limiting charitable deductions and the top income tax rate.

Basic logic says that charities are better off with a higher tax rate, because the deduction for charitable is giving has a higher value the higher the tax rate is.  And anyone can see that limiting deductions does not work in the best interests of charities.  But the Wall Street Journal, bless their soul, has found someone to argue just the opposite.  And entertaining reading it is.

If nonprofits knew what was good for them, they would be focusing less on preserving the charitable deduction and more on economic growth and wealth creation. As the dreaded fiscal cliff approaches, they should be lobbying for a tax system that lowers rates and eliminates loopholes, allowing capital—including charitable capital—to flow to its most productive use. The resulting prosperity would do much more for charities than preserving their own special carve-out from a punitive tax structure.

So what’s the data to support this?  Well here is some

The Tax Foundation has compiled data looking at charitable deductions taken by the "Fortunate 400" wealthiest tax returns since 1992. The data show that these households' share of all charitable deductions, which have largely followed the business cycle over the past 15 years, increased substantially after the Bush tax cuts lowered the top marginal rate to 35% from 39.6%.

Oh yes, the wealthiest increased their share of contributions.  Duh.  The wealthiest increased their share of contributions because the wealthiest increased their share of national income.  Given basic policy of the last several decades that has resulted in a huge shift of wealth and income to the top tiers, of course their share of charitable giving increased as a percent of the total.

And then there is this graph. 


Of course it shows no such thing as lower taxes resulting in higher giving.  It leaves out income distribution, again, which is what is really going on here.

But conservatives facing the well know bias against them of math, logic and analysis have to come up with some explanation of why their policies should work.  Unfortunately for them this is about the best they can do.

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