Diary

Presidential Double-Speak

In a Proclamation released February 27, 2009, by the White House, President Obama proclaimed March 2009 as American Red Cross Month. The Proclamation recounts a time in 1943 when President Franklin D. Roosevelt, at the height of World War II, challenged the American people to raise $125 million in six weeks. The American people stood up and met that challenge, raising the funds in under six weeks. FDR proclaimed the month of March 1943 to be the first Red Cross Month.

Flash forward to today. President Obama recognizes the recent disaster relief, service to the armed forces, and vast volunteer work done by the American Red Cross. Then, he encourages “all Americans to support this organization’s noble humanitarian mission.”

There’s just one sticky issue that should be mentioned.

A recent proposal from President Obama seeks “to impose new limits on charitable tax deductions for wealthy people.”

“So what?” you say. “It’s not going to affect me.”

It just might.

By reducing the value of the tax break on charitable contributions by as much as 20%, President Obama estimates that approximately $318 billion would be raised over ten years. He proposes to put this money towards making health care affordable.

Sounds great, right? Listen to what the plan also says. Here’s another snip from the previously mentioned article:

‘Rebalance the Tax Code’

The proposal to limit the itemized-deduction rate is included in a package of measures designed to free up money for the reserve fund, including reducing Medicare overpayments, cutting drug prices, and improving post-hospitalization care as a way to reduce readmissions.

The plan is an effort to “rebalance the tax code so that the wealthiest pay more,” the document says.

“With this budget, we are making a historic commitment to comprehensive health-care reform,” President Obama told a news conference. “It’s a step that will not only make families healthier and companies more competitive, but over the long term it will also help us bring down our deficit.”

But the idea has drawn mixed reactions in the nonprofit world.

Now, maybe it’s just me, but “Rebalancing the tax code” sounds an awfully lot like “spread the wealth around.”

Let’s look a little further.

The document titled, “A New Era of Responsibility: Renewing America’s Promise,” also states:

The past eight years have discredited once and for all the philosophy of trickle-down economics—that tax breaks, income gains, and wealth creation among the wealthy eventually will work their way down to the middle class. In its place, we need economic opportunity to trickle up.

Last I checked, trickles, like water, flow downhill; I haven’t yet seen a stream that starts at the bottom of a mountain and flows up to the top. Maybe they should have found a better metaphor.

But enough of the rhetoric. What of the money? According to the same article at The Chronicle of Philanthropy (a leading news source, in print and online, for charity leaders, fund raisers, grant makers, and other people involved in the philanthropic enterprise), “Indiana University scholars estimated on Friday afternoon that several billion dollars in giving by the affluent were probably at stake.” Couple that with the following statement by tax expert Sheldon Steinbach:

“Any disincentive to charitable giving, especially in the current economic climate, will have an impact far beyond the black letter law,” Mr. Steinbach said. “It will have an exponentially negative impact.”

That statement can be found here.

Looks like a pretty bleak picture painted for the philanthropic community. Experts warn that this means less money to non-profits, like the American Red Cross, that provide relief, less money to universities and science/technology foundations (how are we supposed to support and improve education if we’re essentially cutting funding?), and less money to charitable giving in general.

Let’s talk numbers. Recall earlier the Proclamation numbers for Red Cross fundraising during WWII and the numbers for the President’s health care fundraising scheme.

FDR: $125 million in under 6 weeks
BHO: $318 billion in 10 years

According to the Inflation Calculator, FDR’s $125m is about $1.6b in today’s dollars, raised in six weeks!

Some of you may recall the letter that JillEE sent out last winter. The Red Cross was trying to raise $100 million to help replenish its Disaster Relief Fund. As far as I know, two, three months later, they’re still trying to raise that much money. Yet, FDR’s America did it in under 6 weeks (in 1943 dollars). I imagine there’s more people, and more wealthy people today — so why can’t they match FDR’s challenge in today’s dollars? I’m sure there’s lots of reasons, but don’t you think it’s possible to do that again?

But despite the encouragement to support the Red Cross, the President’s policies will make it more difficult for donors to do so. By lowering the deduction and applying it to federal programs, it’s almost as if the government is telling individuals, “You can stop giving [so much], the government is taking over.” Unfortunately, giving to charities isn’t always just about giving. (Think about it, how often do you fork over a portion of your income to support a worthy cause?) The tax-deductibility of charitable contributions provides additional incentives for wealthy donors to give large amounts. (For some lists of philanthropic giving, see here, here, or here.)

So, what are you really telling us, Mr. President? Like the juxtaposition of the “porkulus” stimulus bill and reducing the national debt by half in four years, the call to support non-profits with a handicap to donors just doesn’t fly. You can’t have your cake, and eat it, too. Leave the tax code alone; let donors support charities, and let those charities provide goods and services to the people in a way that Big Government can’t–and shouldn’t–compete with.

Mr. President, honor your own advice and support organizations like the Red Cross by not damaging irreparably the fragile environs in which the wealthy voluntarily divest themselves of personal wealth in support of a “cause greater than self.”

Crossposted on The Erb Report – Politics