Obama’s War on Charity
By Mary Theroux • Saturday March 28, 2009 10:49 AM PDT • 22 Comments
Those of us concerned with the voluntary sector are puzzled by the dichotomy between President Obama’s professed belief in the importance of the non-profit sector throughout his campaign, inauguration, and early administration, as in this statement:
…the change that Americans are looking for will not come from government alone. There is a force for good greater than government. It is an expression of faith, this yearning to give back, this hungering for a purpose larger than our own, that reveals itself not simply in places of worship, but in senior centers and shelters, schools and hospitals, and any place an American decides.
with his proposal to decrease the deductibility of charitable contributions. As Martin Feldstein outlines, the net effect will be a likely 10% decrease in contributions to charities.
In effect, the change would be a tax on the charities, reducing their receipts by a dollar for every dollar of extra revenue the government collects. It is hard to imagine a rationale for taxing schools, hospitals, medical research budgets and arts organizations in this way.
By 2011, the year in which the Obama administration proposes to start the new tax rule, the projected decrease in giving would surpass $7 billion. With the endowments of charitable institutions sharply reduced by the fall in stock prices, this loss of gifts would make an already bad situation worse.
Charities are already reeling from the sinking economy, with nearly a third having ended 2008 with a deficit, and declining portfolios and incomes forebode further dismal times ahead.
So why, if he really believes that the non-profit sector is an important part of “change,” does Obama not see that this new tax will disproportionately hurt it? Perhaps it’s because he, like most identifying themselves as “liberal,” won’t notice the change in deductibility all that much: their seven years of tax returns released last year show the Obamas contributing an average of just 1.9% of their income to charity. As Arthur Brooks points out, this falls within national giving patterns by ideology:
In May of last year, the Gallup polling organization asked 1,200 American adults about their giving patterns. People who called themselves “conservative” or “very conservative” made up 42% of the population surveyed, but gave 56% of the total charitable donations. In contrast, “liberal” or “very liberal” respondents were 29% of those polled but gave just 7% of donations.
These disparities were not due to differences in income. People who said they were “very conservative” gave 4.5% of their income to charity, on average; “conservatives” gave 3.6%; “moderates” gave 3%; “liberals” gave 1.5%; and “very liberal” folks gave 1.2%.
The most common theory for the cause of the disparity is the difference in the role liberals and conservatives believe government should play in society, with liberals believing government should provide funding for activities that conservatives think are more rightly served by privately-funded non-profits — and matching their giving to their ideology. Thus, Obama may believe that diverting resources from the non-profit to the public sector is an equally good or better way to achieve his goals.
But is it? On average, 85% of contributions to charity go to service, after covering management, overhead, and fundraising expenses. The charities with which I’m most familiar are The Salvation Army, on whose San Francisco and National Advisory Boards I serve, and The Independent Institute. The Salvation Army is the largest provider of services to the poor, including educational services, after the government, and 83% of contributions to it go to direct services. The Independent Institute operates at 86% efficiency.
Unfortunately, government agencies don’t have to report their overhead expense as do private charities, so there’s no real measure of the comparable figure for the efficiency of public spending. Education is the area with the most readily available figures, so using it for comparative services, we find, according to the National Center for Education Statistics, only 52 percent of public education expenditures are spent on instruction.
This means that if Martin Feldstein’s analysis is correct and Obama’s new restrictions on charitable deductions will result in reducing charities’ receipts by a dollar for every dollar of extra revenue the government collects, the government will have to take in $1.63 to achieve the same effect as $1 given to charity.
Kind of turns the whole concept of a “Keynesian multiplier” on its head, doesn’t it?
Tags: Bailouts, Budget and Tax Policy, Charity, Economics, Education, Family, Great Depression, Healthcare, Politics, Privatization, Regulation, Religion, Taxation, Urban Issues, Welfare 
Think about what our government is attempting to do: It meddles in the affairs of every country in the world. It has the audacity to believe that it can democtratize ancient tribal cultures at gunpoint. It sees fit to tell us what we can put in our bodies, and imprisons those who dare to do otherwise. It now has the power to hire and fire executives in the private sector!
And it does all of this and a million more things because it thinks it knows what’s best for all of us. Once you understand this ridiculous mentality, it isn’t a stretch to realize that these people also think they can replace private charity with the iron hand of the state in “helping” the poor.
Of course, all of this central planning will end disastrously. Haven’t any of them read Hayek before?
We’re going to pay dearly for the hubris of these government do-gooders. God help us.
Steve Hogan | Mar 30, 2009 | Reply
Keep in mind that we have a Constitutional Republic (not a Democracy). Our Constitution clearly states that few powers are granted to the federal government. All other powers shall be given to the several states, or to the people (I paraphrase slightly, but the meaning is clear.
What we have today is a federal government run amok. What we have today is a federal government that is ignoring the Constitution.
If you read the Constitutions of many states, they believe that any federal government actions that stray from the Constitution are “null and void”. That’s an interesting concept.
It is my own opinion that we have maybe two years to take back our government. If we fail in two years to do that, by that time it will be too late.
John Shepard | Mar 31, 2009 | Reply
Interesting.
In Sweden, where we have a right-wing government (at last) we are just about to adopt a tax-deducting system for charities (we will be the last in the EU to do so) while in America, Obama almost makes the opposite. Wonder if it´s a deliberate attempt to weaken the civil society?
AnteBragd | Apr 6, 2009 | Reply
“In May of last year, the Gallup polling organization asked 1,200 American adults about their giving patterns. People who called themselves “conservative” or “very conservative” made up 42% of the population surveyed, but gave 56% of the total charitable donations. In contrast, “liberal” or “very liberal” respondents were 29% of those polled but gave just 7% of donations.”
I cannot find this Gallup poll on the Gallup website. Can you please give me a link to it?
Thank You
Dale Hemming | Apr 7, 2009 | Reply
AnteBradg,
That is precisely his gang’s intent. Although the Senate has now voted it down so we dodged that bullet, for now.
I had a discussion with a friend late last year after the charitable donations of the Obamas were made public along with all their other financials. Candidates have to do this disclosure for the record over here.
Their charitable giving was very low, less than 1% of their income. It did jump right around the time he decided to throw his hat in the ring though. Wonder why?
My friend found it odd that the Obamas, with all their posturing of helping people would give so little. I told him it actually fit quite nicely within their world view. They, like many “liberals” over here think all social aid should fall under the purview and control of government. There has been plenty of research that shows how weak “liberals” are in charitable donations, both in time and money, compared to self-described conservatives or libertarians.
Just another example of the differences between liberals and conservatives in what they consider the proper role of government. Notice which side favors bringing the coercive power of government into play to achieve social “goods”.
Crawdad | Apr 7, 2009 | Reply
Crawdad: You write, “Just another example of the differences between liberals and conservatives in what they consider the proper role of government. Notice which side favors bringing the coercive power of government into play to achieve social ‘goods.’”
In fairness, it was Bush, with overwhelming conservative support, who created the faith-based socialist office that Obama has now expanded.
Anthony Gregory | Apr 7, 2009 | Reply
Crawdad:
See also my newer post, “Separation of Faith and State” on this issue: http://www.independent.org/blog/?p=1740
Mary Theroux | Apr 7, 2009 | Reply
Yes. My own leanings are libertarian. Should have stuck with that. I’m sure conservative organizations, like so many other groups, were hoping to feed at the trough of government largesse. But the Founders had many reasons for keeping church and state separate, broadly speaking, because it perverts both. Religious conservatives often seem to forget what happens when they let government in their doors.
Crawdad | Apr 7, 2009 | Reply
Mary,
I completely agreed with your post. My comment to Mr. Gregory applies here too. Also, I did not know that the Obama-proposed reduction of tax deductions for charitable giving was tied to or was an extension of the Bush faith-based initiative, as Mr. Gregory notes. In my view all charity should be private and the tax deductions for charities should remain.
Mr. Feldstein’s findings are exactly what I would expect to happen should government assume this role. And this is not even touching on the negative social impacts.
Crawdad | Apr 7, 2009 | Reply
Mr. Hemming:
I checked with the Arthur Brooks, from whose op-ed I cited the Gallup poll findings, and he tells me that the poll was commissioned for a book project that is coming out later this year. When it’s released, I’ll post a link to it.
Thank you,
Mary
Mary Theroux | May 1, 2009 | Reply
Don’t you see? Obama’s view of the world—where Government is dominant over everybody’s life (i.e., unlike that of Hayek, Rand) caters to voters who fall on the left side of Murray’s Bell Curve.
Voter2008 | Jun 25, 2009 | Reply
Let’s not be Bulverists, Voter2008.
If Obama’s wrong, he’s wrong. It’s not a question of “who” his ideas cater to.
And I believe if you do your research, a large part of Obama’s worldview caters to and is shared by those on the right side of Murray’s Bell Curve: highly intelligent, educated folk who have unfortunately succumbed to the myth that the government can have anything other than a dysfunctional effect on community, the environment, the economy and society.
In any event, he was certainly elected by people who fall all along the Bell Curve, who projected onto his tabula rasa what they wanted to see.
Best wishes,
Mary
Mary Theroux | Jun 27, 2009 | Reply
Just wanted to say that I read your blog quite frequently and I’m always amazed at some of the stuff people post here. But keep up the good work, it’s always interesting.
See ya
Robert Shumake | Jan 18, 2010 | Reply
Two years is wishful thinking. We have until November 6, 2012. If we blow it on that day we are done.
Scott | Jun 21, 2012 | Reply