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I've been following the new administration more closely than I have politics in the past, due to the new white house blog. Kudos for that. One bit of political double speak dribbled through today, though, from the Office of Management and Budget. At issue here is a proposal to limit charitable deductions made by the extremely wealthy. Regardless of how one might feel about the proposal, it's double speak like this that makes me unhappy:
Third, there’s a question of fairness. Non-profits play a critical role in our society (indeed, I have worked at several of them in the past). But let’s look at how the tax code treats two different contributors to a non-profit. If you’re a teacher making $50,000 a year and decide to donate $1,000 to the Red Cross or United Way, you enjoy a tax break of $150. If you are Warren Buffet or Bill Gates and you make that same donation, you get a $350 deduction – more than twice the break as the teacher.
So, let's unravel that.
Under the current system, if you donate to a non-profit, then you don't pay taxes on that money. It's more or less like you never earned it. In the first example, the teacher would pay $150 taxes on the $1000, and gets that $150 back. Warren would have paid $350 on the same $1000, and so gotten his $350 back.
While on a strictly numerical level you could say Warren got twice as much back as the teacher, it's only because he paid twice as much up front. Calling that "a question of fairness" seems to me completely preposterous.
If the real issue is that the country needs more money, and the only people that can afford to pay for it are the extremely wealthy, then let's just call a spade a spade, and add another higher tax bracket. Games like this just complicate the tax code, and serve no real purpose other than to create a shell game for government revenue.
