As this is written, the Empire State’s one-party rule has led to its own SmackDown show, with the Democratic governor battling the Democratic Senate and the Democratic Assembly (latest New York Times story here). The vetoes and “emergency bills” are landing fast and furious, and if you’re not unfortunate enough to be paying taxes in the state, you may enjoy the noisy spectacle.
Yet one thing is beyond the pale, a low blow that should disturb all of us: These officials, whose irresponsible handling of tax dollars has led to the hemorrhaging of billions of dollars of red ink, plan to take money from charities. Specifically, both sides in the fight intend to divert millions of dollars from the charitable tax deductions of the state’s wealthiest citizens.
This unusual governmental unity has led to unity in the nonprofit world, which is fighting back. The United Way of New York, the United Jewish Appeal-Federation of Jewish Philanthropies, the American Red Cross, the Philanthropy Roundtable, the Union of Orthodox Jewish Congregations of America, and the New York State Catholic Conference have joined together to declare their opposition.
The proposal, although still in flux, would look something like this, as the six charitable federations above put it: “Already, earners of $1 million or more can only claim 50% of their contribution as a deduction. This proposal would allow donors earning $10 million or more to claim just 25% of their contribution.”
The charities observe that this greedy initiative will not be felt “so much by the wealthy taxpayer, but by the charities that are the beneficiaries of his or her philanthropy.” Even worse, it is “a step toward abandoning who we are as a nation,” namely, a nation “that lifts up and supports those most in need.”
Before anyone sneers at the fortunate folks earning incomes large enough to be penalized, let’s recall what’s at stake: Roughly 7 percent of Americans – those in households whose wealth exceeds $1 million – provide about half of all donations received by charity. (For more details, see Arthur C. Brooks’ invaluable book, Who Really Cares.) To make this phenomenon clearer, consider one Knickerbocker datapoint: The state’s sticky-fingered class are hoping to snare around $60 million to $100 million with this money grab; meanwhile, New York City’s billionaire mayor, Michael Bloomberg, donated $254 million to charity last year alone.
The millions that Albany hopes to gain by this tax hike won’t go far to help a state whose operating deficit numbers in the billions, but those millions can mean life and death to charities and those they serve.
What kind of people would try to balance an obese budget on the backs of charities whose revenues are shriveling thanks to the recession and government budget cuts, while their expenses grow heavier with greater demands for aid?
Easy. The same political class that has allowed New York for two straight years to win the American Legislative Exchange Council’s recognition as the state with the worst economic outlook. No wonder New York also leads the nation in the contest to see which state can cause the greatest number of her citizens to flee for other states, as the Manhattan Institute has documented. All told, from 2000-2008 over 1.5 million residents – 8 percent of the population – voted with their feet to throw off Albany’s yoke.
And don't forget just how dirty the state government’s fiscal hijinks have been as it makes life miserable for taxpayers, businesses, and civil society in general. Thomas DiNapoli, the state’s Democratic comptroller, recently issued a blistering report, “New York’s Deficit Shuffle,” that chronicles the shenanigans of recent years. As summarized by George J. Marlin, a historian who’s also been a municipal bond trader and executive director of the Port Authority of New York and New Jersey, DiNapoli reveals how “Albany potentates for years have raided special revenue funds, capital project funds and debt service funds to create the illusion that the state has closed its annual general fund deficit.” (Marlin’s blog, StreetCornerConservative.com, is one of the most entertaining places to keep abreast of New York politics.)
Of course, if you’re a donor or a foundation, don’t even dream of trying to pull stunts like that with your finances. These tricks – which are about as convincing as the fakery in pro wrestling – are reserved for your betters, whose spread-the-wealth generosity seems to tilt strongly towards campaign contributors, especially state employee unions.
How much should non-New Yorkers care about this sideshow? Alas, given New York’s status as a trend-setter, and the pandemic of governmental red ink across the country, we should all start worrying whether charitable deductions, and the good works they make possible, are at risk in our own states.
UPDATE: Michael Barone, co-author of the Almanac of American Politics, has commented on this piece, adding that there is a similar threat at the federal level: "this is a money grab—an attempt to transfer money from charitable institutions to state government with its bloated payrolls and irresponsibly high tensions. It’s pure plunder, the political equivalent of what Attila the Hun did to Rome, and brings to mind the Obama administration’s similar proposal to reduce the charitable deduction. Fortunately, that was rejected, even by the Democratic Congress, last year. But will they embrace it in a post-election lame duck session?"
UPDATE II: The Philanthropy Roundtable has sent a letter to Gov. Paterson and top state legislators objecting to the legislation. The letter notes that donations to charities have dropped dramatically, and "fewer charitable dollars means fewer jobs in the nonprofit sector." Nonprofits employ "nearly 500,000 in New York City alone -- just over 15 percent of the total workforce," which means thousands of jobs are being put in jeopardy.