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Taxing People on What They Give to Charity

Written by Gary North on December 6, 2012

One proposal to raise revenues is to eliminate or reduce the deduction for charity. This will hit the rich.

If you are in the 35% tax bracket, and you give away $100,000, you save $35,000 in taxes. Some Democrats want to reduce this to $28,000. Others want to cap gifts at $50,000. This means that rich people who give away $1,000,000 will get to deduct only $50,000.

This is an attack on charity. This means that the state will have to pick up the slack — or no one.

I hope this monstrosity fails to pass. Better to go over the fiscal cliff.

I lived in North Carolina in 1979. In that state, you could deduct only 15% of your income for charitable donations. You had to pay state income taxes on any more, unless you donated to the state or to a university in the state — a true sweetheart deal for universities.

I moved to Texas. There, I paid no state income tax. I never regretted the move.

I would have owed the state a lot of money on income earned in 1979. So, I put all of the profits into a mailing campaign for my newsletter in late December. That was a tax-deductible expense for 1979. I moved to Texas in the last week of December. The money from the ads came back to me two weeks later. I was living in Texas then. I paid North Carolina nothing. I paid Texas nothing.

It was one of my better moves, tax-wise.

When the state taxes you on money you give away, it is stifling charity. Leftist politicians know this. It lets the welfare state get larger.

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10 thoughts on “Taxing People on What They Give to Charity

  1. Texas Chris says:

    Welcome to Texas, Doc. You got here 6 years after me. I was born here in 1974!

  2. NC is still a high-tax state compared to surrounding southern states.

    Any white collar job and you'll be taxed around 7% effective.

    Texas is looking more and more attractive to me.

  3. U.S. Citizen says:

    We have always tithed. Regardless of what the government has said in the past nor what they will do in the future. God commands it so we will do it.

  4. This is an attempt by the messianic state to put its competition out of business. BY removing the tax deduction, they increase the cost of charity by the tax rate on the giving above the ceiling. They want the entire population to be forced into dependence on them, not the church or any other charitable organization.

  5. This is madness! There is no other way of describing it. It will accomplish nothing other then stifling (choke off) generosity of the wealthy. Cutting off any motive to give to charity or research needs or creating scholarship rewards etc. Really a stupid idea.

  6. I personally have a seperate checking account for Charity. When my paycheck is deposited into my regular checking account, I have an automatic transfer scheduled for 10% of my net pay to the Charity account. (Since my take home pay dropped since I set this up, I am actually transferring close to 15% by now.)

    I use the Charity account to disburse to religious charities in my neighborhood, my city, my country, and in Israel. I try to assure that the charities I support are legit, and it is quite sad to see the number on really needy people growing by the day.

    Really sad.

  7. I am against paying more taxes (increasing tax rates or removing charitable deductions) but since Warren Buffet is OK with raising taxes on the rich is it fair for him to donate $40 billion in Berkshire Hathaway stock that has a basis of about $5,000,000 to the Bill & Melinda Gates Foundation and never pay any capital gains tax on the stock? At a 23.8% tax rate for long-term capital gains (assuming no changes in 2013) that would almost $10 billion for the government to waste.

    OK, the Foundation probably does do lots of good things, mainly for the poor and sick in foreign countries and over $25,000,000 for the William J. Clinton Foundation.

  8. Gene W 1938 says:

    These RINOs and legislators could care less about charity since they do not give … The only reason they do not eliminate the deduction is that it will cost them votes.

  9. Scott Todd says:

    There is one possible bright side- "public" radio will have less $$ to propagandize the public.

  10. The irony is that most charities can stretch their funds to accomplish more with less money than any government agency. People to people has always done a much better job of taking care of disasters than FEMA. While FEMA people were still sitting around drinking coffee and trying to figure out what to do with Sandy refugees, the Red Cross and dozens of volunteer agencies were already there setting up soup kitchens and helping people put their lives back together. Private power companies across the country sent teams of experience electrical people to get the power back on, meanwhile FEMA was still sitting around drinking coffee and trying to figure out what to do…