Donít End the Charitable Deduction!
Tea Party Economist
by Gary North: Are
the Billionaire Koch Brothers Economic Imbeciles? The Cato Institute
Proposes a Test
was written by one of my GaryNorth.com
subscribers. It nails the issue, and it nails the Cato
Institutes Dr. Mitchell, who systematically ignores the
In the past
15 years, I have made a lot of charitable contributions, with the
total recently crossing the line to eight figures. When I retired
six years ago, I decided I would give half of my future annual income
to charity, and so far I have done that. So I can speak with authority
about one mans charitable motivation.
say that I still own some highly appreciated long-term-capital-gains
stock, where my tax basis is close to zero. Under current tax law,
if I sell that stock, I pay federal and state taxes totaling approximately
35% of the current value of the stock. So I get to keep 65% of the
value of the stock.
If I donate
the stock, I get federal and state income-tax deductions against
my ordinary income (mostly interest and dividends) worth approximately
45% of the current value of the stock.
So, at the
margin, it costs me only 20% of the stocks value to put 100%
of the stocks value in the charitys hands. Do I think
that the charity can do more good with $100 than I could do with
$20? Unless my charitable choices are really bone-headed, the answer
is obviously yes. Can a charity do more good with $100
than government can do with $35? Here the answer is a resounding
YES! Actually, the charity will do more good than government could
do with ten times that amount, if you believe that government spendings
net effect on society is negative.
If I give
cash, my marginal cost is currently 55% much higher than
20%, but its still enough of a discount to motivate my giving.
For various reasons, about half of my giving is in cash.
the past few months, Ive actually been thinking about how
I would change my plans next year if the charitable deduction were
to be limited. Theres no question that I would reduce my giving,
stopping at the tax-deductible limit. That is in fact what I already
do, since the 50% I now give is the maximum percentage of my gross
income for which I can currently take a federal charitable deduction.
If the charitable
deduction is capped or eliminated, will I scream bloody murder?
No, the charities will do that for me. I can afford to wait for
a new Congress and a new administration, and a better deal.
is an imbecile, at least insofar as this topic is concerned. The
Rich are not some amorphous class; they are individuals with
real motivations and preferences.
North [send him mail]
is the author of Mises
on Money. Visit http://www.garynorth.com.
He is also the author of a free 31-volume series, An
Economic Commentary on the Bible.
2012 Gary North
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