President Obama likes to talk about the value of contributing to your community, but in the jobs bill he sent to Congress yesterday, he targets such contributions for increased taxation. By limiting tax deductions for voluntary giving, Obama would consolidate government control over helping your fellow man and improving your community.
On the White House’s own account, the jobs bill would cost $447 billion, of which $400 billion would be raised by limiting itemized deductions for high-earning individuals and families. Among other things, deductions lower the cost of contributing to charities and other nonprofits (including The Atlas Society) by allowing the people who made the money to contribute it to such organizations undiminished by the income tax. Limiting the deductions means that, to an extent, the most productive Americans, unlike those of us earning under $200,000 annually, would have to make their contributions with taxed money.
While a case can be made that a properly simple tax code wouldn’t have these or any other deductions, and there is probably plenty to be said about other deductions, it’s worth examining the significance of limiting these particular deductions in the context of the expansive government we have and the tax system that supports it.
By taxing the money productive citizens give to nonprofits, the President would not shift individuals’ resources from spending on personal luxuries to civic or charitable purposes. This is money that is already being spent voluntarily on assisting others or contributing to public goods. If anything, the President’s policy would shift money away from charitable and public causes, since the deductions encourage people to contribute much more than the value of the deductions.
What would be shifted under the President’s proposal is control of spending on assistance and public goods. Deductions enhance your ability to spend the money you make on those charitable and civic ventures you think are worth the money. If you value education, you can contribute to that; if you value medical research, you can support that. You can invest in the people you value and in the kind of world that would enhance your life. And in so doing, you can build relationships that are valuable to all involved.
Taxes, on the other hand, deny you that control. Once the government takes your money, it can spend it on things you think aren’t worth your money—or even on things you judge destructive. For example, perhaps you currently donate to private schools that, following the Sudbury or Montessori model, encourage students to develop strong, independent, inquisitive minds; under the President’s jobs plan, if you’re a high earner, some of that money would be taken and used to subsidize public schools that stress mastering exactly the knowledge, skills and methods prescribed in a politically generated curriculum, under rules better suited to inculcate compliance than independence.
Looking at the bill in terms of jobs—after all, it’s called a “jobs” bill—we should notice that one of its major components is a plan to spend money paying government employees, especially teachers in public schools. This would save or restore jobs in public schools, but because the money would come mostly from taxing donations, it would do so at a cost in jobs in schools funded by donations. Whatever the net impact on the total number of teaching jobs, careers in this influential profession would be even more dependent on government than they already are.
And just as the bill would reduce the ability of the people who make the money to use some of it to pay for private instead of public schools, and just as it would reduce the ability of the people who do the teaching to choose to do it in private instead of public schools, it would reduce the opportunities for people who seek education to obtain it in private instead of public schools. The more civic and charitable activities are funded and controlled by government instead of through voluntary giving, the less opportunity everyone involved has to guide his involvement by his own judgment of what will contribute to his own life.
It’s particularly striking that we see this proposal from a president who places such a high value on serving one’s community. The aspect of life he proposes to shift from voluntary action to government control is, by his lights, among the most important aspects of an individual’s life. But when the government takes your money and uses it for its purposes, you’re not the one who’s acting; the government is acting with money that was yours. If that, to the president, is an adequate substitute for your own deliberate action to benefit others in a way you find worthwhile, that implies that by his standards what is important is not that you engage with your community but, rather, that other people are able to get what you have produced. And that’s an important distinction: It’s the difference between a vision of the productive individual as a benefactor who enriches her life and the lives of those around her with civic and charitable deeds—and a vision of the productive individual as an egg-laying chicken whose value comes from the ability of others to feed on the wealth she produces for purposes of her own.