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How Romney’s tax cap almost brought down the British Government

The Republican candidate’s latest scheme for decimating arts and charities was given a bumbling introduction during his third debate with President earlier this week. Here’s how Governor Romney laid it out:

In terms of bringing down deductions, one way of doing that would be to say everybody gets—I’ll pick a number—$25,000 of deductions and credits. And you can decide which ones to use, your home mortgage interest deduction,┬ácharity, child tax credit and so forth. You can use those as part of filling that bucket, if you will, of deductions. But your (tax) rate comes down, and the burden also comes down on you.

We’ve heard those words before. They were in George Osborne’s UK budget statement earlier this year – a proposal to limit annual tax relief on charitable gifts. Oddly enough, the figure plucked by Osborne was also 25 – in his case, 25 percent of earned income.

Huge sections of the nation – churches, arts, the philanthropic sector, the super-rich – rose up against the measure in the greatest show of national unity since the Blitz. George Osborne was forced to eat his words. The measure effectively destroyed his support base, along with his hopes to succeed David Cameron as ┬áTory leader.

Odd that Mitt stole George’s idea, and ignored the political consequences.

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  1. Yes, it’s true: the biggest threat to Big Bird (and charities in general, not just arts nonprofits) is not the proposed end of direct federal subsidy; rather, it is Republican tax policy proposals. The cap on deductions combined with lower rates would reduce incentives for charitable giving. The end of the estate tax would have similar effect.

    Some Republicans will try to claim that truly generous people will give, regardless of tax policy. Such an argument is bizarre and incoherent coming from a party which in any other context advocates self-interest and economic incentives.

    • William Safford says:

      I agree. One can look at the charitable contribution tax deduction as an indirect Federal subsidy of the arts. It can be described as being part of the social contract: instead of the government directly subsidizing arts organizations, the deduction allows (mostly rich) people to deduct their charitable contributions from their taxes.

  2. Petros Linardos says:

    Why should Romney’s words be taken seriously? He keeps changing positions.

  3. Hilarious. First the prevailing view in “the arts” is that the richest should pay more tax. Hey, that’s only fair, right?
    So a politician proposes removing one of the ways in which the richest can avoid paying some tax, in a move designed to make them pay more tax. And then the same people say “oh, wait, hang on, that’s not what we meant. We want them to pay more tax, sure; but, erm, not in this way, um…”

    You can’t have it both ways! It is a nonsense to argue that the richest must pay more in tax in every way – except the one small way which benefits your own special interest group. If you want the former, you have to concede the latter (as do other special interest groups across areas where it affects them – for example if the tax benefits associated with investing in filmmaking were removed). You can’t have your cake and eat it, or whatever the saying is; that’s just inconsistent, and frankly selfish.

    • Anon’s argument ignores that Romney’s proposal begins by greatly lowering the RATES. (It’s hard to pin jello to the wall, so the actual amount of the rate cut has varied, but 20% is the most cited figure.) Romney then claims that capping or eliminating deductions would make up for the lost revenue. Every reputable analyst of this proposal has concluded that the numbers don’t work and the net effect would be to add to the deficit. It’s part of the Republican “war on math”.

      The effect of the proposal would be to shift the tax burden downward: for the very rich, the rate cut would dwarf the loss of deductions; for middle/professional class people, the loss of deductions for mortgage interest, health care, education, and charitable giving would in many cases outweigh the rate cut. Of course, those deductions are so popular that it is very unlikely that they would be eliminated or even reduced; which is why I think the whole thing is a fraud. And that’s before we get to the effect of eliminating the estate tax.

      Incentives for charitable giving matter (as they matter in other contexts). Lowering rates while capping deductions decreases incentives; keeping the full charitable deduction while returning the top rate to what it was during the Clinton years would increase incentives.

      Also, the proposal is a cap on charitable deductions – nothing specific to the arts. So that would affect giving to universities, soup kitchens, nature conservancies, emergency relief organizations, charity hospitals, and yes, your local museum.

      Unlike Europe, we do not provide significant government funding for the arts; we compensate for that by a policy, and a culture, of charitable giving by individuals. We favor letting individual Americans give to the charities of their choice, and we facilitate that with tax deductions. Thus, the funding decisions are driven more by individual decisions than by government. (We also take a similar policy approach to many other causes, such as social services.)

      One other point: much charitable funding for the arts and other causes comes from foundations. Such foundations are typically set up by a wealthy person who donates tax-exempt sums to the foundation, which then distributes at least a certain amount a year. So does the Romney proposal to cap the charitable deduction apply to gifts to one’s foundation (or to a community foundation)? To ask the question is to suggest the intellectual bankruptcy of the Romney proposals. If the answer is yes, then Romney is proposing to damage an important American institution for charitable giving; if the answer is no, then Romney is proposing a whopping tax benefit to the very rich, while reducing the charitable deduction for the merely well-off.

      The “special interest” group at issue here is the American taxpayer, who would like to continue supporting the charity of his or her choice.

  4. Romney keeps flipping back and forth and has no concrete plan. How can we trust him??

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