Many people assume that the level of charitable giving in America is driven by the tax code and tax deductions. Well, let’s see……….
After the 1986 Tax Reform Act, charitable giving increased rather than decreased. Charitable giving rose by $6.4 billion, or 7.6% in 1987, after the top tax rate fell from 50 to 28%. Also, charitable bequests were growing most rapidly from 1980 to 1987, when estate taxes were coming down.
The FairTax increases the incentive to give. Under the FairTax, wage earners are taking home 100% of their paychecks, leaving a substantial increase in available funds for charitable giving. Under the current income tax system, the charitable deduction only offsets a portion of a taxpayer’s tax liability. And in addition, that taxpayer is giving with “After-Tax Dollars”. For the 2-out-of-3 taxpayers who currently do not itemize deductions, the FairTax will allow them to make these charitable givings “Pre-Tax Dollars”, from 100% of their paycheck.
For Charitable Organizations, their donations would increase under the FairTax by $2.06 billion. This translates to a .89% increase the first year, a 2.40% increase within 10 years, and a 4.99% increase after 20 years. When the economy is up, personal giving is up; when it’s down, so is personal giving. With the FairTax, the economy will be on a steady rise, which means charitable giving will soar to new heights. So here again, it’s a win-win!
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2 comments:
They're gonna need it. The FairTax would tax non-profits' "purchases of goods and services that are not sold on to individuals, including capital goods." (Kotlikoff)
Kotlikoff calculated that non-profits' taxable spending for 2007 would have been $121.7 billion (tax exclusive). That means non-profits would have paid ~$36 billion in FairTax in 2007!
Well, they are going to have more money to do it with. It is my understanding under the FairTax, the price of goods and services will decrease by 22%, which is almost as much as the fairtax is going to be, which will be a wash. Another thing I understand, is that Charitable organizations will be exempt from paying the FairTax on goods and services as long as they are certified to do so.
One more thing - The government will no longer be able to "regulate" the churches under the FairTax. No more telling them what they can and cannot do or say as far as politics or political figures go. Think about that - a total separation of Church and State.
Have a good weekend.
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