It’s not just Big Bird that Romney plans to fire; He will also try to screw America’s charitable nonprofits if he is elected. Brian Beutler explains at Talking Points Memo:
Mitt Romney’s big new tax reform idea — to cap the amount individuals can benefit from tax deductions in a given year — still lacks for hard specifics but the basic shape of the idea provides tax economists key clues about its potential incidence. And the biggest loser, if he were to implement the plan as president, according to an expert on charitable giving, would be one of the right’s favorite features of the tax code: the deduction for charitable giving.
“The effect on charitable giving is likely to be large for high income individuals, especially in the short run,” says Jim Andreoni, a UC San Diego professor of economics who studies the economics of charitable giving.
Under the current tax code, people are allowed to deduct scores of expenses from their taxable income. Mortgage interest is tax deductible. The cost to workers of their employer-provided insurance is excluded from their taxable income. And reflecting the long-held conservative view that private giving rather than government should be the main source of public welfare, charitable contributions are partially exempt from taxation.
If Romney were to impose a cap on the total amount individuals could benefit from these deduction, people would likely respond by shifting priorities, experts say. But some priorities are more easily shifted than others. While it’s very difficult to downsize a home, and a bitter pill to accept stingier health insurance benefits, cutting smaller checks to churches, universities, and ballet companies is a no-brainer.
…”[D]ata show that the tax deduction is very important to donations,” Andreoni adds. “So, high income donors will have two reasons to cut back on giving. First, they are losing after-tax income from deductions on things other than giving and that are hard to adjust, like mortgage interest. Second, giving itself will become far more expensive and is far easier to change than other deductions. It’s intuitive to me that charitable giving will take a big hit from the cap on deductions.”
Milton Friedman, sainted economic guru of libertarian Republicans, urged his fellow conservatives to give to charities as an alternative way to help the poor in preference to government public assistance programs. Ayn Rand, in stark contrast, condemned even charity for the poor as a misguided value worthy of contempt. Romney, like Ryan, clearly identifies more with Rand’s viewpoint, and that is not likely to sit well with most Americans.