Chad Aldeman: Obama Tax Changes Will Boost Short-Term Giving
Chad Aldeman has a very interesting post in which he cites some NBER data indicating that the timing of charitable giving is very sensitive to tax policy shifts to argue that Obama’s proposed change to rich people’s ability to itemize deductions will provide extra economic stimulus
Upon taking office in 1981, President Reagan lowered the highest income tax bracket from 70 to 50 percent. As this rate fell, high-income tax filers had lower tax incentives to donate to charity. In 1986, Reagan proposed lowering the rate again, this time to 33 percent. Before the tax provisions took effect but while the proposal was being discussed, charitable contributions from high-income tax filers rose. That’s the spike you see in 1986. The rate lowered again the following year, and it stayed relatively constant until 1993. President Clinton had campaigned on raising the highest-income tax brackets, and he set about to do that once in office. Note the big giving spikes around 1992 and 1993. President George W. Bush successfully lowered the top rate in 2002, and again, the giving rate responded.
All this is to say that tax policy works in the short-term. Givers are very responsive to changes in charitable deduction rates, and they modify the timing of their gifts. If President Obama wants to stimulate giving in the short-term, lowering the rate on deductions is the best way to do it. If donors have the option of deducing 35% of their tax rate this year or 28% next year, they’re going to do it now. His proposal actually stimulates giving in the short-term.
Sounds clever.
This is a reminder that nonprofits have an unfortunately pro-cyclical character. The very time when well-endowed foundations are likely to have ample funds to disburse is the exact same time when wealthy individuals are inclined to be in a giving mood. Then down goes the economy and both the grants and the individual donors dry up. Except times of trouble are exactly when people need poverty. Back in 1999, there was basically nothing stopping any healthy, properly motivated individual from finding a job. Perhaps not a good job, but still a job. Here in 2009, it’s not like that at all. Nonprofits are needed. But they have less capacity than they would if there were a boom and nobody needed them.
22 Responses to “Chad Aldeman: Obama Tax Changes Will Boost Short-Term Giving”
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March 3rd, 2009 at 4:23 pm
Boring.
March 3rd, 2009 at 4:23 pm
So, Matt, you’ve achieved your ambition: to be a PR flack for a liberal Democratic Administration.
Is it really as wonderful a job as you’d dreamt?
March 3rd, 2009 at 4:33 pm
I don’t feel that I need poverty at all.
March 3rd, 2009 at 4:38 pm
Steve,
Considering he’s advocating the exact same things as he has been for years across multiple blogs, that he presumably actually believes in and wants to see accomplished: Yes, I would think it’d be quite wonderful to be a paid advocate to bring about the change you want.
I mean, wouldn’t you want to be paid a good salary to write about how great it’d be to send all illegal immigrants home?
March 3rd, 2009 at 4:39 pm
Just an interesting aside with all this tax talk — I never learned a darn thing about tax rates in any civics classes or anything. The dust-up today about ABC was the first time I’ve ever had marginal taxation actually explained in a way I could understand. I’m usually pretty well-informed about current affairs and government function, but I’ve never been concerned enough about taxation to really pay attention.
That said, now that I know how the whole system works, I’m really aghast that wealthy folks whine as much as they do. I thought their tax rate was paid against the whole of their income. Instead I find that that’s not the case, and they’re really bitching about the rates on the part of their income that is far beyond their needs.
If you’re wealthy enough to be bitching about Obama’s taxes, you’ve got no business bitching in the first place. This country has been darn good to you. Try living down HERE and see what it’s like. I’ll tell you one thing — I’d happily pay a higher tax rate on the top end of my earnings in order to be that wealthy. I wouldn’t whine that the government was taking my money. I’d be happy I had the opportunity to earn at such a rate, and glad I had a government that helped to protect that wealth for me.
March 3rd, 2009 at 4:47 pm
James,
Precisely. They like to pretend marginal taxation just doesn’t exist. That family making 300k a year? (Which is more than the vast majority of families in the US will ever come close to making.) They pay $1500 more a year under this plan. Boo fucking hoo. It’s entirely about people who have so much wanting just a little bit more, for that extra vacation home or Lexus for their 16-year-old. While millions of people wonder how they’re going to buy groceries and tens of millions watch their retirement go up in smoke. Fucking pathetic.
March 3rd, 2009 at 4:48 pm
Except times of trouble are exactly when people need poverty.
============================================================
Well, maybe if you’re a priest. But they have to take vows of chastity as well.
I mean REALLY
March 3rd, 2009 at 4:52 pm
“Except times of trouble are exactly when people need poverty.”
You know, someone could really do an awesome collection of MY quotes to make him look like the most insane person alive. How has one of his stalkers not done this yet? (Forgive me, 24AHead if you have, nobody’s going to click on your site to find out.)
March 3rd, 2009 at 5:32 pm
Adam Says:
March 3rd, 2009 at 4:38 pm
Steve,
Considering he’s advocating the exact same things as he has been for years across multiple blogs, that he presumably actually believes in and wants to see accomplished: Yes, I would think it’d be quite wonderful to be a paid advocate to bring about the change you want.
=============================================================
The point is, he’s not saying “exactly the same things”, especially since he left The Atlantic.
If anyone bothered I bet you could find scores of Matt posts where he talks about the wonderful 90s during the Clinton era when the market went from height to height and it showed the superiority of Bill’s economic policies. Now that the market is down and it might reflect poorly on BHO we’re told that the DJIA doesn’t really mean very much after all.
No integrity. Party hack
March 3rd, 2009 at 6:10 pm
times of trouble are exactly when people need poverty.
Sometimes trying to figure out what the fuck he’s talking about is just not worth the effort. If he doesn’t read this shit, why should we?
March 9th, 2009 at 3:21 am
Seems like the corporates contribute to charity only to save on tax payments. Whatever the situation, companies should pledge part of their profits to charitable causes. Sounds angelic, but I doubt many of them practice this.
March 9th, 2009 at 8:05 pm
excellent post, very informative
March 14th, 2009 at 8:54 am
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p.s. You have an awesome template . Where did you find it?
March 16th, 2009 at 5:58 pm
sry i just know how to write my name in arabic
) anyway however my english not that good but i think i get the point. thanks
March 16th, 2009 at 7:56 pm
sry i just know how to write my name in arabic
) anyway however my english is very poor but maybe i understand what you talk about. thanks
March 16th, 2009 at 8:41 pm
sry i just know how to write my name in arabic
) my bad english donot help to type here but really thanks.
April 5th, 2009 at 12:36 pm
Is there a way to become a content writer for the site?
April 5th, 2009 at 1:11 pm
I dont usually comment, but after reading through so much info I had to say thanks
April 8th, 2009 at 7:59 pm
The style of writing is very familiar . Have you written guest posts for other blogs?
April 10th, 2009 at 10:19 am
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April 15th, 2009 at 5:32 am
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