The first major disagreement between the Obama White House and the Democratic Congress may be in the offing. As part of the 2010 budget, the administration wants to limit charitable deductions on high earners. Problem is, members of Congress don't like it.
During a committee hearing on the president’s budget, Baucus pressed Treasury SecretaryTimothy F. Geithner on the issue, saying the administration should do [sic] find savings within current health care programs to fund a health care overhaul, instead of resorting to a tax hike for that purpose.
The administration proposes limiting the value of itemized deductions claimed by taxpayers in the top two tax brackets (which would be 36 percent and 39.6 percent starting in 2011) to the value the deductions would have for taxpayers in the 28 percent bracket.
The plan would raise $318 billion in additional revenue over a decade, but critics charge that it would discourage philanthropy. The wealthiest Americans account for a huge share of charitable giving each year.
The other $316 billion of the cost would be covered by savings from Medicare and Medicaid programs.
Baucus said that he is “especially concerned about the 28 percent limitation” on deductions, and said he is “wondering about viability of that provision.”
“You’re not wedded to the 28 percent limitation?” Baucus asked Geithner. “I urge the administration to dig down deeper to find viable savings – concentrate on savings within health care reform.”
His counterpart on the House Ways and Means Committee, Chairman Charles Rangel (D-NY) had similar reservation in Tuesday's hearings.
And why wouldn't there be serious reservations? Has the administration really thought this through?
The country is in the middle of a major recession -- with some economists even use the "d" word to describe the truly historic economic and fiscal problems the country currently faces. But it's precisely during these times that charitable organizations are most needed -- whether it's to provide food, clothing, temporary shelter or even medical and counseling services. As the need for these organizations increases, so too does their overhead.
And at a time like that, the federal government would change the rules with respect to charitable giving? Reasonable people can disagree about the idea of progressive taxation -- and what levels are appropriate. But the administration's proposal would have the very real effect of taking possible funds from groups that are helping the needy and underprivileged -- so the federal government can then use those funds for its desired program (in this case, health care).
Of all the possible ways to raise revenue, this has got to be the most bizarre and wrong -- on ethical, if not ideological grounds. The fact that two very different Democratic chairmen -- Baucus, a white moderate from the West, and Rangel a black liberal from the Northeast -- both raised flags suggests that the Obama team might want to head back to the drawing board on this proposal.
Robert A. George is a New York writer. He blogs at Ragged Thots.