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The Strange World of Philanthropoids

People who operate foundations or live off of grants from foundations (I admit to the latter distinction) sometimes have odd ideas about government. One of the oddest is that if a non-profit program is successful the government should take it over. The government has so much more money, you see. That the government (also made up of good people who nonetheless are often myopic) can suffocate a good idea with over-regulation and attempts at micro-management never seems to occur to them.

So, too, taxes.

I have watched with bemusement as the charities of the land, many of them organized under The Independent Sector, have begun lobbying against the proposed limit on charitable deductions. They fear, correctly, that if wealthy people can only donate so much and deduct it, their giving will be limited. And so it will.

Indeed, if the charities of the country realized how hard they will get hit by such a provision they would be even more exercised than they are. Imagine the wealthy person who has just sold his business and thinks this would be a good time to make a major bequest to the local hospital, school or (great idea) his favorite think tank. Just then his financial advisor says, wait a minute, you already are going over the limit on tax deductible donations this year. Do you really want to do this?

It doesn't take much to turn off a generous impulse, and a tax advisor's scowl might just be enough.

Regardless, the philanthropoids on both sides of the giving process (donors and donees) somehow think that an alternative to the dreaded deduction limit is a higher tax rate on high earners. The truth is, these rich folk already are getting hit with higher taxes in the year ahead (starting with Obamacare's surtax of 3.8 percent--see my earlier posts) and are getting cautious anyhow. Hit them harder--and, oh, by the way, keep telling them what miscreants they are, unlike noble public servants and the philanthropoids-- and the tax advisors are going to come at them from another direction.

The charities supporting higher taxes on their donors also fail to understand that "rich", like "poor", is often a relative term. This year I'm poor, but then in the coming year I sell the farm and am rich, but then after that my income sinks and I go back to being poor. Why would a charity want to have the government hit me really hard in my "rich" year, when that is the precise moment I might be contributing to the charity?

Only a growing economy and a feeling of well-being on the part of the folks with money is likely to conduce to generous impulses that are pursued to completion. Happy donors means more money for foundations to spend and charities to receive. Now, this kind of trickle down economics is for real.

Or do you think the government can spend it all better?

You can email brucechapman@discovery.org

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