Overlooking the Reason for a Deduction

Monday, March 30, 2009

President Obama and reader Rosalind Stark [letters, March 27] have forgotten the reason that the tax code allows a deduction for charitable donations in the first place: to stimulate charitable giving, acting effectively as a government subsidy to charities while allowing taxpayers to decide where to direct the funds.

The other fact that is getting lost is that, even with a tax deduction for a donation, the taxpayer still has a net cash outflow. There is no "reward" to the taxpayer for donating money.

Ms. Stark says that under Mr. Obama's proposal to lower the allowable percentage deduction for charitable giving by high-income taxpayers, "higher- income givers would receive benefits no greater than those that the rest of us might enjoy."

But if a taxpayer in the 28 percent bracket gives a charity $1,000, even after the tax deduction, his checking account is down $720. Yet the charity still receives $1,000! So isn't that a benefit to the charity rather than the taxpayer?

Besides the basic arithmetic, there is some sort of misplaced outrage against wealthy taxpayers. Mr. Obama and Ms. Stark don't mention that the higher deduction by higher-income taxpayers is a direct result of the fact that they are paying a higher percentage of their income in taxes than "the rest of us." I hope that this is not a harbinger of the administration inciting resentment against people who have become successful by honest work within our treasured free-enterprise economy.



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