Who Needs Charitable Giving when You Can Have Big Government?

Michael Giberson

At the Arizona Economics blog, Scott Gustafson runs some numbers on the limits on tax deductions for charitable giving contained in the Obama budget outline for 2010. Drawing on numbers from the budget outline (as summarized in this Washington Post article), Gustafson concludes that the administration thinks the change will result in $45 billion drop in the amount of charitable giving that qualifies for tax deductions.

While, as Gustafson notes, many of the affected individuals will give to charities anyway, it is reasonable to expect some drop off in charitable contributions.

Asked about that, Office of Management and Budget Director Peter Orszag said Mr. Obama took care of that by giving charities government money to make up part of the difference.

“Contained in the recovery act, there’s $100 million to support nonprofits and charities as we get through this period of economic difficulty,” he said.

Gustafson observes that, “$100 million is 0.2% (two tenths of 1 percent) of $45 billion. Somehow I think that losing a tax deduction on $45 billion in charitable giving will reduce it by a bit more than two tenths of one percent.”

So, the administration’s proposed reaction to a projected drop off in charitable giving is to increase government spending. But 0.2% likely won’t make up the shortfall.

As Brody said to Quint: “Your gonna need a bigger boat.”