Charities will be hit hard in the year ahead as taxes go up on people making over $200,000 ($250,000 a couple), on people realizing capital gains from sales of equities and on estates of deceased persons. Charities also are beginning to notice that the tax law that allows grandparents to gift their grandchildren will change significantly in 2013.
The size of the estate tax exemption is scheduled to go down to $1 million. According to the IRS, the number of deceased persons whose estates will be subject to pay what conservatives call "the death tax" will rise from 8,600 (estimated for 2011) to 114,600.
If you think this is only "fair" you might start to consider who the disappointed heirs are. A whole lot of middle class or even poor people are hoping for inheritances to help them through their own retirement years. A good portion of their hopes presently are slated to be absorbed by the government.
The charities I know (including Discovery Institute!) are hoping that people will avoid the January 1 rush and donate money now while, for example, the capital gains tax is 15 percent rather than the 20 percent it is slated to reach in the new year.
Yes, Congress and the President, whoever he is, probably will relent on some of these slated increases, but you can't be sure. Instead, the "tax increases for the rich" are likely to be expanded down the income ladder as the budget deficits worsen. Since the Federal Income Tax first was adopted in 1913 the promise that only the rich will get hit tends to get shelved once an election is over. "Ask not for whom the tax bill tolls..."
Meanwhile, the huge American non-profit sector, which is full of liberal folk who probably will vote for candidates who pledge to tax only "the rich", may find that as charitable giving drops in the new year they have helped trap themselves.