The tax deductible debate: I am sold, how about you?

When the idea first surfaced by WH, like many I was skeptical at least, stunned almost. You know that news about how ultra rich folks can get tax deduction on their charitable contribution. Obama wants to cut short the amount you can deduct by limiting the effective percentage of the contribution you can deduct. I was skeptical thinking about possible negative impact that may have on the amount those people will be contributing. Not fully, but almost stun thinking about how outraged our friends in the wrong side (not the right side, lol) with a big wallet will be. You know, people like Carly Fiorina. Of course, I was equally stunned when, just before 2008 election, she demanded absolution of progressive taxing system that we have for so long. Forget rollback of bush tax cut for the rich, she wants her tax rate to be same as Joe the fake plumber. So any tax cut or roll back issue, her dumb friends in Foxy Noise would argue “well, rich get more tax cut because they gave more tax in the first place”. I say, well, what gave “in the first place” is what we call progressive tax. That is well settle reality, there is no point going there.

 

But today in presidential press conference, Obama was asked the very same question. I had to shift focus from playing with my two year old to TV screen. Obama’s answer was to the point and in plain English, almost custom made just for me. Basically his point is, if Warren Buffet and his secretary both donate $100 to Red Cross, why would Warren Buffet get 39 dollars of it back, while his secretary get only say 20 dollars back? That is not fare, is that? I am sold by his argument. How about you?

 

Here is Obama's little long answer on the question from Politico's Mike Allen. Okay, I know, it is kind of long. By now we are getting used to this type of extended press conference form our new president. I know, he is trying to sell his product, but never the less I am enjoying it. It is better to here from the man in charge than those pundits in the Pandora box.

 

QUESTION: Mr. President, are you -- (takes mic) -- thank you. Thank you, Mr. President. Are you reconsidering your plan to cut the interest-rate deduction for mortgages and for charities? And do you regret having proposed that in the first place?

 

PRESIDENT OBAMA: No, I think it’s -- I think it’s the right thing to do.

 

Where we’ve got to make some difficult choices -- here’s what we did with respect to tax policy. What we said was that over the last decade, the average worker, the average family have seen their wages and incomes flat. Even at times where supposedly we were in the middle of an economic boom, as a practical matter their incomes didn’t go up. And so (what/well ?) we said -- let’s give them a tax cut. Let’s give them some relief, some help -- 95 percent of American families.

 

Now, for the top 5 percent, they’re the ones who typically saw huge gains in their income. I -- I fall in that category. And what we’ve said is, for those folks, let’s not renew the Bush tax cuts. So let’s go back to the rates that existed back in -- during the Clinton era, when wealthy people were still wealthy and doing just fine. And let’s look at the level at which people can itemize their deductions.

 

And what we’ve said is let’s go back to the rate that existed under Ronald Reagan.

 

People are still going to be able to make charitable contributions. It just means if you give $100 and you’re in this tax bracket, at a certain point, instead of being able to write off 36 (percent) or 39 percent, you’re writing off 28 percent. Now, if it’s really a charitable contribution, I’m assuming that that shouldn’t be the determining factor as to whether you’re giving that hundred dollars to the homeless shelter down the street.

 

And so this provision would effect about 1 percent of the American people. They would still get deductions. It’s just that they wouldn’t be able to write off 39 percent. In that sense, what it would do is it would equalize. When I give $100, I get the same amount of deduction as when some -- a bus driver who’s making $50,000 a year or $40,000 a year gives that same hundred dollars. Right now, he gets 28 percent -- he gets to write off 28 percent, I get to write off 39 percent. I don’t think that’s fair.

 

So I think this was a good idea. I think it is a realistic way for us to raise some revenue from people who benefitted enormously over the last several years. It’s not going to cripple them.

 

They’ll still be well-to-do. And, you know, ultimately if we’re going to tackle the serious problems that we’ve got, then in some cases those who are more fortunate are going to have to pay a little bit more.

 

Full transcript:

http://www.cnn.com/2009/POLITICS/03/24/obama.news.conference.transcript/index.html

 

Cheers

Babu