Is there a war on the charitable deduction? The opening salvo against the charitable deduction was the Obama administration’s Social Innovation Fund. Although not targeted directly at the charitable deduction, the SIF unambiguously declared that government, not voluntary individual action, ought to determine how America’s charitable dollars are spent.
But if government is the wiser philanthropist: Why the charitable deduction?
Indeed, in both their 2010 and 2011 budgets, the Obama administration proposed cutting the charitable deduction. Then came the Empire State. Last August, then New York Governor David A. Paterson did what the Obama administration only threatened to do: he signed into law a revenue bill passed by the state’s legislature that limits charitable deductions for New Yorkers. About 3,500 New York taxpayers are now able to write off only 25 percent of their charitable contributions on their state income taxes rather than the previous 50 percent. Other states will surely follow trend-setting New York.
Then the chairmen of President Obama's deficit commission took a swipe at the charitable deduction, proposing instead to eliminate the deduction and replace it with a 12-percent tax credit. The commission’s plan would put an end to all itemized deductions and create three new individual tax brackets, from 12 percent to 28 percent. But the 12-percent tax credit for charitable gifts would only be for those whose charitable gifts amounted to more than 2 percent of their adjusted gross income. Today, we get Princeton professor Ewe Reinhardt taking aim at the charitable deduction in a New York Times blog post. The professor’s post is another in a string of critiques wagered by the Times against the charitable deduction in recent weeks. Setting aside the merit or lack of merit regarding the professor’s salvo against America’s tradition of voluntary charity, there is something ironic about foreign-born university professors who take refuge in American universities — the happy beneficiaries of endowed chairs supported by philanthropic dollars freely given — griping about the charitable deduction. Perhaps the professor is not aware that The Madison Professorship that he holds at Princeton is but one of more than 160 professorships and lectureships supported by endowed and term funds. These funds came voluntarily from charitable gifts and bequests of alumni and friends of Princeton University. Voluntary charitable giving to Princeton over the decades has helped its endowment swell to nearly $15 billion. Indeed, America’s tradition of philanthropic freedom has made our universities the envy of the world, attracting talent — like professor Reinhardt — from all manner of countries where universities must appeal primarily to government, rather than private philanthropy, for their funding. But professor Reinhardt would undue the system of which he is a principal beneficiary. Of course, there are meritorious arguments in favor of reducing or even eliminating the charitable deduction as one element of a tax code overhaul. But that is not what the war on the charitable deduction is all about, and it’s not what professor Reinhardt is all about. Critics of the charitable deduction understand government, not individuals acting freely, as the better philanthropist. The war on the charitable deduction is about dismantling America’s tradition of voluntary charitable action and philanthropic freedom in favor of a government-run system, the kind that professor Reinhardt fled.