A recent Wall Street Journal article (Tuesday, February 2, 2010) noted that President Obama’s 2011 budget calls for a $1 trillion dollar tax increase on families with incomes above $250,000. Top bracket rates would be 39.6%. It is projected that upper income families would face $969 billion in higher taxes between 2011 and 2020.
At first blush, many rush to support these tax increases with the notion that “the rich can afford it.” But there are ripple effects to these tax increases.
Giving is definitely affected. In this economy where many have lost jobs or are underemployed, the small giver has been hit hardest. It is the major giver who has in many cases helped keep charities afloat.
In my own church, the executive pastor tells me that 10% of the givers are now carrying 90% of the church’s budget. And when we tax the high income earners we are taxing the major givers.
More tax means less disposable income. And while President Obama has been quick to point out that giving is not motivated by tax breaks, the truth is still painfully obvious: if I’m spending more money on tax, then I have less to give. It’s pretty simple math.
Finally, I’ve worked with charities in Europe. There, the tax rates are high, and there is no charitable deduction. Their story is worth repeating: with those two factors—high tax and no deduction—people don’t give. They figure they already gave—in the form of taxes.
So the tax on the wealthy will impact charity in a real and negative way. Think about it.