At his press conference on Tuesday, President Obama seemed willing to dig in his heels on a proposal to cut deductions for charitable giving. While seen from the prism of making the wealthy suffer more, what the consequences of the move are is that charities will feel the pain when donations drop. Here is what the president said about that at the press conference when asked whether he’s convinced that charities are wrong in their thinking:
Yes, I am. I mean, if you look at the evidence, there’s very little evidence that this has a significant impact on charitable giving.
I’ll tell you what has a significant impact on charitable giving is a financial crisis and an economy that’s contracting. And so the most important thing that I can do for charitable giving is to fix the economy, to get banks lending again, to get businesses opening their doors again, to get people back to work again. Then I think charities will do just fine.
However, a study conducted by Bank of America and Indiana University’s Center on Philanthropy found that curtailing the charitable tax deduction would “somewhat” or “dramatically” decrease the contributions of 47 percent of affluent donors. The study also reckoned that Obama’s budget would cut donations nationally by $10 billion to $20 billion per year. That’s a lot of money to charities and, in a time when people are struggling due to the economy, it puts the groups most willing to help in a bad position.
And how much does it help the government to bring in that extra revenue from decreased deductions? Michael Rosen, writing in National Review Online, says that estimates from Office of Management and Budget say that the government will see a yield of only $7 billion in revenue in the 2011 fiscal year. Considering how the government gets things done compared to charitable organizations, that’s not a lot.
So, respectfully, we must disagree with the president on this one. There will be a significant impact on charities. And, it will go beyond just what they can bring in each year. It will affect the services they can offer and how people will look at the work of charities. Instead, the president’s decision will place the government in the role of the charitable organization. It’s a poor replacement and that’s a mistake.