Democrats and Republicans are looking at tax hikes that would undermine the prosperity that fuels philanthropy.
Democrats and Republicans are looking at tax hikes that will undermine the prosperity that fuels philanthropy.
N o matter who wins in November, civil society is at risk of losing. That means America’s biggest problems will get even bigger — from addiction and homelessness to poverty and poor education.
This sad reality reflects the fact that Democrats and Republicans are looking at tax hikes that will undermine the prosperity that fuels philanthropy. Members of both parties also increasingly support tax hikes on nonprofits that do critical work in communities — work that Americans inherently do better than government.
Democrats’ proposed tax hikes are most concerning. Look no further than Kamala Harris’s new proposal to raise capital-gains taxes by 40 percent. While the current vice president is pitching this tax hike as a pro-growth policy, in reality it will hold back the innovation, investment, and wage growth that create wealth for every American. The result will be a smaller economy with less money to give to charitable causes.
The same goes for the outright wealth tax that Kamala Harris and Democrats in Congress support. Such a tax targets assets, not just income, which almost certainly include the charitable foundations that successful Americans often create. All told, a wealth tax would likely take billions of dollars away from charitable giving, starving countless worthy causes of resources.
If Democrats get their way, Americans of all income levels will have less money to donate. On average, Americans give about 2 percent of their disposable income to charity every year, so when wage growth and wealth creation slow, civil society inevitably gets less funding to tackle the many urgent challenges facing communities.
But it’s not just Democrats. Shockingly, many Republicans are forgetting — or ignoring — this time-tested wisdom.
While Donald Trump supports extending and even expanding upon the relief from his Tax Cuts and Jobs Act, his running mate, J. D. Vance, has supported higher taxes on job creators. A growing number of House Republicans are also reportedly willing to raise taxes, likely to punish what they see as corporate America’s leftward drift. That same political frustration has some conservatives flirting with tax hikes on a wide array of nonprofits, perhaps in exchange for extending the 2017 tax cuts.
None of these ideas — from the left or the right — will improve lives or address the country’s many challenges. It doesn’t matter whether Washington taxes civil society directly or stifles it by rolling back the low taxes that undergird a free and flourishing economy. Either way, the result will be a bigger government that tries yet fails to do the difficult work for which civil society is uniquely suited.
Whether it’s a small nonprofit or a large foundation, civil society taps into the genius and collaborative spirit of the American people, who have a proven record of solving big problems together. The social sector is nimble in a way that government isn’t, responding quickly and effectively as challenges arise. The charitable response to the Covid-19 pandemic is concrete proof. Generous Americans supported struggling families in countless ways, without undermining the economy or individual freedom.
Civil society can also tailor its approach in ways government can’t, since laws and regulations are, by definition, one-size-fits-all. Consider the immediate local response after Maui’s devastating fires last year. Charities provided immediate aid to people who lost homes and businesses, showing the superiority of local community to long-distance government funding. History has repeatedly shown that the best way to help people isn’t funding more bureaucrats. It’s empowering everyday Americans to find innovative solutions, since they’re closest to the problems they’re trying to solve.
Politicians forget these truths at America’s peril. Democrats would be wise to abandon tax hikes that hurt philanthropy and charity, unlikely as that seems. Regardless of what the Left does, Republicans should return to opposing tax hikes, remembering that lower taxes strengthen the economy and civil society alike. Instead of a blanket tax on some nonprofits, lawmakers should cut billions of dollars in federal earmarks and subsidies to these organizations. Civil society doesn’t need government aid and would be able to achieve more in the long run with the extra giving made possible by lower taxes.
Our country doesn’t need two parties that want government to have more power. We need leaders who let Americans keep more of their money — not only because that’s morally right, but because it’s essential to breaking the barriers holding back so many people.