PRESIDENT Obama’s drive to reduce tax deductions for charity means trouble for New York – especially its cultural institutions.
Consider: The Metropolitan Museum of Art just announced that it’s eliminating 74 full- and part-time employees from its merchandising staff and plans to reduce overall staff by upward of 10 percent in the near future.
And those cuts are prompted simply by the stock market’s decline, which has hammered the Met’s endowment. Still ahead is the hit the museum would take from Obama’s proposals to make it about 20 percent more expensive for top earners to give to charities by reducing what they can deduct from their tax bill.
So, even as people are upgrading their calculators to handle the large number of zeros required by the Obama administration’s gargantuan spending packages, cultural leaders are asking themselves: What in God’s name is he doing?
A headline from the Chronicle of Philanthropy cuts to the chase: “Obama’s Tax Plan Could Cause Giving by the Wealthy to Drop by Several Billion Dollars Annually.”
The White House says Obama’s plan shouldn’t affect charitable giving because it won’t take effect until 2011 when (so they hope and pray) the economy will be humming along with 4 percent growth.
They forgot to mention that 2011 is also the time when Obama’s plan to raise the rate on incomes above $250,000 to nearly 40 percent (up from 35 percent) is scheduled to kick in. How’s that for a two-fer?
Let’s say you are currently paying at the 35 percent tax rate. You gave $1,000 to the Museum of Modern Art last year. You got to deduct $350 from your taxes. If the Obama plan goes through, that gets cut to $280. Plus, if you have a family income of $250,000 or more, your tax bill goes up by nearly 5 percent. (You’ll also get to deduct less of your mortgage interest, and the tax on any capital gains is also set to jump.)
And all this comes on top of a vast hemorrhaging of wealth in the market. Since Inauguration Day (Jan. 20), the market has dropped more than 2000 points, nearly a quarter of its value. According to a study conducted by Indiana University’s Center on Philanthropy, every drop of 100 points in the stock market means a decline of $1.85 billion in charitable giving. You do the math.
People are poorer. They have significantly less money now than a year ago. So the president picks this moment to propose raising taxes and reducing deductions for that part of the population that donates sig- nificantly to culture and the arts? Go figure.
People are nervous. They have every right to be. I called several museums last week to canvass opinion about the likely effect of the administration’s plan to limit charitable deductions to 28 percent, down from 35 percent. The predominant response was nervous silence. No one from the Museum of Modern Art would even talk to me. Ditto the Guggenheim.
“Americans are a philanthropic people,” Emily Rafferty, the president of the Metropolitan Museum of Art, said. They will continue to be “as generous as they can.” But the administration’s proposal to cut charitable deductions and raise taxes will certainly “make a difference.”
“If at every step of the way there is an impediment” to giving, she said, the result will “definitely” be harder times, not just for museums, but for “the whole nonprofit sector.” Rafferty expressed sympathy for some of the administration’s stated goals, but asked: Given the crisis in the economy, “why make it harder” for people to give?
Why indeed? Perhaps Obama doesn’t want to make life harder for cultural institutions – but merely (as in so many other things) wants to nudge US philanthropy in the direction of Europe, where the state, not the individual, is the chief source of cultural largesse.
Shortly after Obama unveiled his budget, the commentator Charles Krauthammer noted that the document had solved a mystery: “We’ve been trying to figure out who Barack Obama is, where he’s really from. From Hawaii? Indonesia? The Ivy League? Chicago? Now we know: He’s a Swede.” Sweden’s a great place – but America is not Sweden. More and more Americans are waking up to the fact that they like it that way.
Roger Kimball is editor and publisher of The New Criterion and publisher of Encounter Books.