Class Warfare Has Unintended Targets

Reports the Washington Post:

In his prime-time news conference Tuesday, Obama pushed back against bipartisan criticism of his plan, which is included in his budget blueprint, by saying that "there’s very little evidence that this has a significant impact on charitable giving."

No, actually there is evidence.  (Hat tip: Betsy’s Page.)

But a report from the Center on Budget and Policy Priorities said total charitable contributions would decline by about 1.3 percent, while the Center on Philanthropy at Indiana University calculated that overall giving would drop by 2.1 percent. The highest-income households would decrease their giving by 4.8 percent, or $3.87 billion, the latter group found.

"Charities and the public need to understand that in the current economic environment, which is creating difficulty for some nonprofits and their constituents already, this public policy change is likely to have an additional negative effect," said Patrick M. Rooney, the philanthropy center’s interim executive director.

When you penalize something, you get less of it.  It’s a truism that Democrats like Obama have yet to figure out, but churches and soup kitchens are well aware of it.

The classic example is taxing yachts to soak the rich.  During the first Bush administration, a tax on yachts over $100,000 was instituted to try to increase the already huge percentage of the federal treasury that came from the rich.  The result was that middle-class ship builders lost their jobs because the sales of yachts sank by 70%, significantly faster than the overall boat market.  So President Bush came to their rescue and rescinded the tax. 

Taxes are not behavior-neutral.  They will affect the actions of those who are affected by them.  Democrats only seem to understand this when they do things like raise taxes on gas to try to reduce consumption, but they conveniently forget it when they trumpet how much they’re trying to help the little guy.  Problem is, their actions often hurt the little guy in the end, and the rich just do without one more yacht in their marina. 

Filed under: Doug • Economics & Taxes

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