Tax Reform and Charities

Charities stand to lose billions in donations if Republicans advance their tax overhaul, prompting the nonprofits to carefully attempt to persuade lawmakers to reshape their plan.

As a result of a proposal to double the standard deduction and prevent people from deducting state and local taxes from federal taxable income, fewer taxpayers—5% instead of 30%—would have a financial incentive to itemize their deductions, including their charitable gifts, according to several estimates.

Especially estimates by charity associations, who also have a vested interest in claiming that, with no deduction incentive, Americans won’t donate to charity as much as we do presently.  Americans, though, at least the vast majority who do donate to charity, do so because it’s a right thing to do, not because we get a tax deduction for the donation.  That last simply makes no financial sense. Say a donor is in the 39.6% bracket.  If he makes a $1,000 donation, he’ll get a deduction of $396.  His donation still will cost him $604: he’s lost money on the donation/deduction exchange.  The cost to the donor increases as we go down the brackets.  American taxpayers aren’t stupid.

When we put a charitable contribution and its deductiblilty in the context of the rest of the deductions, we see even further the foolishness of the concern.

For example, a married couple with costs of $7,000 in mortgage interest and $6,000 in local taxes would exceed today’s $12,700 standard deduction. That couple would have an incentive to itemize and deduct every dollar of charitable contributions.

The totality of deductions must exceed a threshold before the deductions can be taken, and then only the amount exceeding the threshold can be deducted—all of them together.  Thus, a charitable deduction in combination with a mortgage deduction gets the deduction spread across both costs together—driving the cost of the charitable donation even closer to the amount actually donated.

American taxpayers aren’t stupid.

David Wills, President Emeritus of the National Christian Foundation has a different take.

We don’t think that anybody should have their charitable giving taxed. Anybody[.]

Leaving aside the illegitimacy of using our tax code for social engineering, the tax on a charitable donation would become pretty unimportant to the donor under any serious tax code reform, including the present one that’s on offer.

American taxpayers aren’t cheap, either.

In short, I’m not convinced charities will suffer overmuch with a combination of lower tax rates and elimination of the charitable tax deduction (among other deductions also being eliminated)—especially given the doubled standard deduction that’s in the current proposal.  With more money in our pockets instead of Uncle Sugar’s, Americans will be freer to donate.

We Americans are neither stupid nor cheap.

Collapsing Obamacare

These data are from the Kaiser Family Foundation.  There was such hope by the health care coverage providers at the start; then the realities of the “market” place hit, and hit hard.  Following the early expansion of coverage providers into ObamaMart, the drop-off in companies between 2016 and 2017, and the resulting collapse of choice—in too many counties, even of any availability at all—is stark.  It’s expected to get worse in 2018 and 2019, too.

The State-by-State drop off is presented in the table below, constructed from KFF‘s table at the link.  The average drop-off across all States is nearly 23%.

Obamacare must be eliminated, and a free market set of parameters that would facilitate actual health insurance must be set in place.  Republicans need to get on the stick, and promptly.

Location Number of Issuers in 2014 Number of Issuers in 2015 Number of Issuers in 2016 Number of Issuers in 2017 Per Cent Drop-off
Alabama 2 3 3 1 66.7%
Alaska 2 2 2 1 50.0%
Arizona 8 11 8 2 75.0%
Arkansas 3 3 4 3 25.0%
California 11 10 12 11 8.3%
Colorado 10 10 8 7 12.5%
Connecticut 3 4 4 2 50.0%
Delaware 2 2 2 2 0.0%
District of Columbia 3 3 2 2 0.0%
Florida 8 10 7 5 28.6%
Georgia 5 9 8 5 37.5%
Hawaii 2 2 2 2 0.0%
Idaho 4 5 5 5 0.0%
Illinois 5 8 7 5 28.6%
Indiana 4 8 7 4 42.9%
Iowa 4 4 4 4 0.0%
Kansas 3 3 3 3 0.0%
Kentucky 3 5 7 3 57.1%
Louisiana 4 5 4 3 25.0%
Maine 2 3 3 3 0.0%
Maryland 4 5 5 3 40.0%
Massachusetts 10 10 10 9 10.0%
Michigan 9 13 11 9 18.2%
Minnesota 5 4 4 4 0.0%
Mississippi 2 3 3 2 33.3%
Missouri 3 6 6 4 33.3%
Montana 3 4 3 3 0.0%
Nebraska 4 4 4 2 50.0%
Nevada 4 5 3 3 0.0%
New Hampshire 1 5 5 4 20.0%
New Jersey 3 5 5 2 60.0%
New Mexico 4 5 4 4 0.0%
New York 16 16 15 14 6.7%
North Carolina 2 3 3 2 33.3%
North Dakota 3 3 3 3 0.0%
Ohio 12 15 14 10 28.6%
Oklahoma 4 4 2 1 50.0%
Oregon 11 10 10 6 40.0%
Pennsylvania 7 8 7 5 28.6%
Rhode Island 2 3 3 2 33.3%
South Carolina 3 4 3 1 66.7%
South Dakota 3 3 2 2 0.0%
Tennessee 4 5 4 3 25.0%
Texas 11 14 16 10 37.5%
Utah 6 6 4 3 25.0%
Vermont 2 2 2 2 0.0%
Virginia 5 6 7 8 -14.3%
Washington 7 9 8 6 25.0%
West Virginia 1 1 2 2 0.0%
Wisconsin 13 15 16 15 6.3%
Wyoming 2 2 1 1 0.0%

A Bit More on Health Care Coverage

Senator Susan Collins (R, ME) is worried about health care plan availability to our poor, which she thinks would be endangered were President Donald Trump to act on his thoughts regarding cutting off the funds the Feds pay to health coverage plan providers to get them to charge (artificially) lower deductibles and copays from the poor.

It really would be detrimental to some of the most vulnerable citizens if those payments were cut off. They’re paid to the insurance companies, but the people that they benefit are people who make between 100% and 250% of the poverty rate.

Couple things about this. One is that folks making more than the poverty rate…aren’t poverty-stricken.

The other is that, if the money really is intended to help folks pay for health care coverage plans, the money should go directly to those folks and not to the insurance companies. That way there would be no loss to internal friction in the middlemen of health care plan providers—a friction loss extant even in the most honest and well-intended of providers.

And one more: these aren’t insurance companies selling insurance policies.  It isn’t insurance when risks are transferred by Government fiat and at fees that bear no relation to the risks being transferred.

Collins knows these things full well.

Obamacare and Choice

There are 3,142 counties and equivalents (Louisiana has parishes, Alaska has boroughs, three States each have an independent city, Virginia has 38 of them, and State of Rhode Island and Providence Plantations does things entirely differently) in the US.

The Centers for Medicare and Medicaid Services expects that 40 of those counties will have no health care coverage plan providers at all in 2018, and 1,332 of those counties—over 40% of them—will have only one such provider.

Not to put too fine a point on the matter, but this is not choice.  This also drives home the lie of “If you like your doctor, you can keep your doctor; if you like your insurance plan, you can keep your insurance plan.”

Obamacare’s implosion is in full swing, it’s happening rapidly, and Republicans are fiddling.  They can bleat that it’s all Progressive-Democrats’ fault, that the Progressive-Democratic Party owns Obamacare to their heart’s content.  It’s irrelevant.  The Republican Party has been running on repeal and replace for the last four election cycles, and they now have majorities in both houses of Congress, and they have the White House.  The Republicans own repeal and replace—and they own the failure to make even the first syllable of progress toward that worthy end.

Timid Republicans need to find their courage and get on with the business.  Along these lines, others who demand that it all be done at once—both right damn now and in a single bill—need to recall the lessons of Obamacare as a single, all-at-once, almost right damn now bill, and they need to keep in mind political realities: Republicans in the Senate don’t have the filibuster-proof majority the Progressive-Democrats had for most of the time they were putting together their bill.

Repeal and replace can’t, won’t, and shouldn’t happen in a single bill.  It’ll need to occur as a series of bills, although those bills need to be passed in quick succession as politics go: over the course of a couple of Congressional sessions, or at most over two Congresses.

Senators Susan Collins (R, ME) and John McCain (R, AZ) are desperate to return to “regular order,” to negotiate with Progressive-Democrats and to hold hearings.  Fine.  Do that.  Those hearings need not take longer than a couple of weeks—especially if the Senate (read: Republicans) get rid of the ridiculous 2-hour per day limit on hearings—and the negotiations can be done similarly quickly, particularly since the Progressive-Democrats have shown they won’t seriously negotiate.

But get after it.  Republicans need to stop dithering, stop playing with their…fiddles…and get on with the business.  They have their own choice to make regarding their place in Government and in the nation.

What Do Teachers Unions and the NAACP Have Against Poor Children?

Richard Whitmire, a contributor to The 74, offered some information that might bear on the question in his piece in The Wall Street Journal.  The National Education Association and the NAACP both oppose charter schools, the one because they don’t use union teachers and the other because they attract poor kids to charters and away from inner city public schools in which the NAACP is so politically invested.  In other words, because as Whitmire put it, charters upset the comfortable status quo of these adults.

Now some hard data via Whitmire’s piece; these are in addition to the rising test scores that charter school students are achieving (especially compared to comparable schools—which is to say public schools in poor districts).

Graduates from the top charter networks—those with enough high school alumni to measure college success accurately—earn four-year degrees at rates that range up to five times as high as their counterparts in traditional public schools.

Those traditional counterparts are low-income, minority students in public school systems in cities like Eric Garcetti’s United Teachers Los Angeles-run LA and Rahm Emanuel’s Chicago Teachers Union-run city, cities where the NAACP also is highly influential.

There’s this datum, too:

Roughly half the graduates of Uncommon, YES Prep and the KIPP New York schools…earn bachelor’s degrees within six years. About a quarter of the graduates of the lower-performing charter networks earn degrees within six years.

This compares with 9% of “graduates” of low-income public schools.

One more: charters help their graduates succeed in college with active advice on course to take, how to manage the credit amounts within and across semesters, even such things as how to perform while being the only minority student, or one of a very few, in what used to be an all-white class.  Those public schools just shove their students out onto the street.

Actually, the teachers unions and the NAACP don’t have anything in particular against these charter children of low-income families.  The kids are just tools to be used for the benefit of union leadership and NAACP virtue signaling.