Commentary > Op-eds
Obama's War On Alexis De Tocqueville
By Stuart Buck, Nathan Gray and Robert Maranto, For The Bulletin
“The political associations that exist in the United States are only a single feature in the midst of the immense assemblage of associations in that country. Americans of all ages, all conditions, and all dispositions constantly form associations…” - Alexis de Tocqueville
As de Tocqueville wrote in his 1835 classic Democracy in America, American democracy and society are distinguished by our unique ability to organize ourselves into private groups. America has, pound for pound, the largest nonprofit sector in the developed world. This sector’s social entrepreneurs have pioneered innovations later adopted by the government. As de Tocqueville wrote of 19th-century Americans, “in this manner they found hospitals, prisons, and schools.” Barack Obama himself got his start as a community organizer, funded by nonprofits.
So why is the Obama administration acting to restrict the lifeblood of private nonprofits, charitable contributions? In a press conference last month, President Barack Obama defended a proposal to limit tax deductions for charitable contributions. The current practice is that all donors are allowed to take charitable contributions off their taxes, which means that high-income taxpayers in the 35 percent tax bracket will (on average) lose only $65 for every $100 they contribute to charity (i.e., they would get $35 back on their tax bill). The importance of charitable contributions cannot be overstated: Americans give more than $300 billion a year to charities, and our government has traditionally understood the importance of encouraging American civil society to flourish.
But under Mr. Obama’s new plan, high-income people would get only a 28 percent refund on their taxes, even if they had paid a 39.6 percent tax rate on that money. Not only would high-income people face a higher tax rate in the first place (thus lessening the amount of money they have to give to charity), they would also be unable to get a full tax deduction on any money given to charity. This amounts to a huge new tax increase on charitable giving.
Contrary to Mr. Obama’s claim that “there’s very little evidence that this has a significant impact on charitable giving,” his plan would cut giving by at least several billion dollars a year, according to analysis from the Indiana University Center on Philanthropy. And that is probably on the low side: Mr. Obama’s own budget estimates (http://www.whitehouse.gov/omb/assets/documents/S-6.pdf) predict that between 2010 and 2019, the new limitation on itemized deductions will raise nearly $180 billion for the government, or $18 billion a year, with another $338 billion coming from raising the income tax rates. That’s a huge amount of money taken out of the private sector, a large portion of which goes to charities to feed the poor, heal the sick and educate everyone.
The result will be less innovation and entrepreneurship by the private associations that de Tocqueville praised. Consider one example: The much heralded “Knowledge Is Power Program,” or KIPP, operates 66 charter schools in 19 states that do a stellar job serving poor and minority children. KIPP might never have been able to expand beyond the initial two campuses had it not been for a $15 million seed donation in 2000 from a private foundation.
In contrast, the public education establishment has never managed to produce such a promising educational innovation, despite spending hundreds of billions of dollars every single year. Yet Mr. Obama wants to take money from organizations like KIPP and give it to the government instead.
Mr. Obama’s OMB director Peter Orszag defends the new plan, arguing it won’t take effect until 2011. But a bad idea is still a bad idea, even if delayed for a couple of years. Mr. Orszag also claims the new tax revenues would be earmarked for health care. But even so, there are surely better ways to fund health care than by choking off private charity.
Taxing the rich is one thing, but taxing the rich at the expense of helpful nonprofit organizations is quite another. Could this be the Obama administration’s subtle way of ushering in the era of big government?
De Tocqueville astutely observed that whereas the “government” is the head of any “new undertaking” in France, “in the United States you will be sure to find an association.”
But as Michael Barone has written, “Barack Obama evidently wants us to shift vast sums of money from the voluntary associations extolled by Alexis de Tocqueville to the bureaucratic networks described by Max Weber.” Wittingly or not, President Obama is creating an incentive for Americans to be more like France in allowing the government to crowd out civil society.
Stuart Buck and Nathan Gray are researchers and Robert Maranto is a professor in the Department of Education Reform at the University of Arkansas.
As de Tocqueville wrote in his 1835 classic Democracy in America, American democracy and society are distinguished by our unique ability to organize ourselves into private groups. America has, pound for pound, the largest nonprofit sector in the developed world. This sector’s social entrepreneurs have pioneered innovations later adopted by the government. As de Tocqueville wrote of 19th-century Americans, “in this manner they found hospitals, prisons, and schools.” Barack Obama himself got his start as a community organizer, funded by nonprofits.
So why is the Obama administration acting to restrict the lifeblood of private nonprofits, charitable contributions? In a press conference last month, President Barack Obama defended a proposal to limit tax deductions for charitable contributions. The current practice is that all donors are allowed to take charitable contributions off their taxes, which means that high-income taxpayers in the 35 percent tax bracket will (on average) lose only $65 for every $100 they contribute to charity (i.e., they would get $35 back on their tax bill). The importance of charitable contributions cannot be overstated: Americans give more than $300 billion a year to charities, and our government has traditionally understood the importance of encouraging American civil society to flourish.
But under Mr. Obama’s new plan, high-income people would get only a 28 percent refund on their taxes, even if they had paid a 39.6 percent tax rate on that money. Not only would high-income people face a higher tax rate in the first place (thus lessening the amount of money they have to give to charity), they would also be unable to get a full tax deduction on any money given to charity. This amounts to a huge new tax increase on charitable giving.
Contrary to Mr. Obama’s claim that “there’s very little evidence that this has a significant impact on charitable giving,” his plan would cut giving by at least several billion dollars a year, according to analysis from the Indiana University Center on Philanthropy. And that is probably on the low side: Mr. Obama’s own budget estimates (http://www.whitehouse.gov/omb/assets/documents/S-6.pdf) predict that between 2010 and 2019, the new limitation on itemized deductions will raise nearly $180 billion for the government, or $18 billion a year, with another $338 billion coming from raising the income tax rates. That’s a huge amount of money taken out of the private sector, a large portion of which goes to charities to feed the poor, heal the sick and educate everyone.
The result will be less innovation and entrepreneurship by the private associations that de Tocqueville praised. Consider one example: The much heralded “Knowledge Is Power Program,” or KIPP, operates 66 charter schools in 19 states that do a stellar job serving poor and minority children. KIPP might never have been able to expand beyond the initial two campuses had it not been for a $15 million seed donation in 2000 from a private foundation.
In contrast, the public education establishment has never managed to produce such a promising educational innovation, despite spending hundreds of billions of dollars every single year. Yet Mr. Obama wants to take money from organizations like KIPP and give it to the government instead.
Mr. Obama’s OMB director Peter Orszag defends the new plan, arguing it won’t take effect until 2011. But a bad idea is still a bad idea, even if delayed for a couple of years. Mr. Orszag also claims the new tax revenues would be earmarked for health care. But even so, there are surely better ways to fund health care than by choking off private charity.
Taxing the rich is one thing, but taxing the rich at the expense of helpful nonprofit organizations is quite another. Could this be the Obama administration’s subtle way of ushering in the era of big government?
De Tocqueville astutely observed that whereas the “government” is the head of any “new undertaking” in France, “in the United States you will be sure to find an association.”
But as Michael Barone has written, “Barack Obama evidently wants us to shift vast sums of money from the voluntary associations extolled by Alexis de Tocqueville to the bureaucratic networks described by Max Weber.” Wittingly or not, President Obama is creating an incentive for Americans to be more like France in allowing the government to crowd out civil society.
Stuart Buck and Nathan Gray are researchers and Robert Maranto is a professor in the Department of Education Reform at the University of Arkansas.
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