With Barack Obama repeatedly defending his plan to reduce the percentage of charitable donations that is tax deductible, some of the nation’s leading figures in charities are politely but firmly saying: “You’re wrong.”
In extensive conversations with me last week, two nationally-known past presidents of the Red Cross and a top official of Goodwill Industries of Greater Washington weighed in strongly against the Obama to reduce deductibility for charitable donations among the top income earners from 39% to 28%.
“Whether it is the American Red Cross or the Salvation Army or any time-honored organization, to reduce the tax deductibility for supporting them is to tamper with a social contract that is doing good,” said Dr. Bernadine Healy, former president of the American Red Cross.
Healy, who also served as head of the National Institutes of Health, also sharply disagreed with the President’s remarks at his news conferences that with the deductibility reduced, “I’m assuming that that shouldn’t be the determining factor as to whether you’re giving that $100 to the homeless shelter down the street.”
“If major and small donors to charities were all giving $100, that’s one thing,” Healy told me, recalling that she has been raising money for non-profit organizations such as the Cleveland Clinic and Ohio State Medical College before she came to the Red Cross. “But after spending a good part of my life in the world of non-profits, I found that people who make a lot more money tend to be major givers to charity.”
As for Obama’s reply at the news conference that a busdriver who makes $50,000 a year gets to write off 28% of a $100 donation and “I get to write off 39% [and] I don’t think that’s fair,” Healy replied, “He’s comparing donations from two different tax brackets and that doesn’t make sense.”
Brendan Hurley, vice president of Goodwill Industries of Greater Washington, agreed strongly. In his words, “[W]hile every charity likes to believe that the motivation for giving is purely philanthropic, the reality is that if no one benefited from the tax deduction, no one would claim it.”
Like Healy, Hurley cited his experience in fund-raising and concluded that “the largest percentage of donation revenue comes from high income wage earners.”
He also warned that reducing the deductibility of such major donors could lead to a severe reduction in revenue for charities. He recalled how when Congress reduced the deductibility on used vehicles donated to charity from the fair market value to the retail value, “there was a 40% drop in the donations of vehicles.”
Elizabeth Dole, who was president of the American Red Cross for eight years, said that “in these times of economic uncertainty, our government should be seeking ways to increase contributions to charities.” As for the Obama plan, the former North Carolina senator and Cabinet secretary under two Presidents said, “I strongly oppose any effort that will reduce incentives for donations to charities."
“In my time in the Senate, I worked to expand tax incentives for charitable giving and to allow individuals to contribute their IRA distributions tax free," Dole said. "The government cannot do it all and cannot possibly meet the needs of our poorest in difficult economic times without the generous support of donors, many of them wealthy. A proposal that seeks to reduce incentives on the contributions of the wealthy will do far more harm to the poor than the revenue raised from such a scheme can possibly produce.”
Is Obama Charity Plan Dead On Arrival?
Given the mounting criticism of Obama’s plan to reduce charitable deductibility, the Senate voted against it in completing the budget resolution on Thursday. There also is talk that the administration might just retreat on the proposal. Such an about-face occurred last month, when talk of making third-party payers reimbursed veterans’ hospitals for health care for servicemen came under fire and was taken off the table by the administration after 36 hours.
“Reducing deductibility for charitable donations is sort of in the same category as the plan for veterans’ health care,” Healy said.
At a breakfast hosted by the Christian Science Monitor yesterday, House GOP Whip Eric Cantor (Va.) branded the Obama charity scheme “a major mistake” and told reporters: “I wouldn’t be surprised if you eventually hear that from the White House.”