Opinion
Alice in the White House
Examiner Editorial
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March 7, 2009
Two of President Barack Obama’s latest tax hikes so quickly fail the laugh test as to make one wonder if Alice in Wonderland has taken up residence in the White House as an economic advisor. The first would limit tax deductions for upper-income earners for their donations to charities. The second would limit their deductions for mortgage-interest payments. Such thinking is the opposite of what is needed with today’s economy. Obama proposes that people in the top tax bracket of 35 percent be able to deduct their donations or mortgage payments at the lower 28 percent rate. If charitable donors want to keep the same amount of after-tax money, they would have to donate seven percent less to the charities to make up the difference. Likewise, they would be able to afford smaller monthly house payments than under current policy.
The problem here isn’t that “rich” people would suddenly be harmed by the higher taxes. The problem is that charities and the housing market would be severely harmed. Every dollar the government takes out of the economy leaves fewer dollars to be donated or invested. Not a smart thing to do in a steep recession. If there is ever a time when charities are more needed, it’s when more people are out of work. And when the recession’s roots lie largely in the collapse of the housing market with millions of foreclosures, the last thing lawmakers should do is make housing even less affordable.
Obama’s Office of Management and Budget director Peter Orszag ludicrously claimed that charities would not suffer because the president generously set aside $100 million in the recently passed “stimulus bill” to support non-profit entities. In other words, Obama and federal bureaucrats, not individual Americans, will be choosing which charities are worthy of receiving such support. That’s another dangerous expansion of government control by an administration that continually seems to hunger for more.
Obama estimates that the new taxes on charities and mortgage deductions will increase government revenues by somewhere between $180 billion and $318 billion, an amount that seems almost insignificant in a $3.6 trillion annual budget. As part of a far simpler and flatter tax code, eliminating these two and all other deductions would make sense. But as merely tinkering with the same old complicated monstrosity of a tax code, attacking these particular deductions – especially in a recession – is nonsensical.
