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.