September 10, 2015
The Washington Post began its editorial on Jeb Bush’s tax cut proposal by telling readers, that it is “worth taking seriously.” Most of the rest of the editorial is telling us the opposite. The basic story is that everyone gets a tax cuts, with the biggest savings going to the wealthy. That is projected to reduce revenue by $3.2 trillion over the next decade (@ 1.5 percent of GDP), but the magic growth elixir will get us back $2.0 trillion of this shortfall.
Paul Krugman and others have beaten up on this story (can they really sell this one yet again?), so I’ll just focus on one aspect I find especially annoying. While the proposal will sharply limit deductions for things like catastrophic medical bills and state and local taxes, it allows the deduction for charitable givings to remain unlimited. (Actually, the current cap of 50 percent of adjusted gross income stays in place.)
I have nothing against charities, but we need to look at this one with clear eyes. The presidents and top executives of many non-profits currently get pay in the high hundreds of thousands of dollars or even millions of dollars. Is it really necessary to subsidize these paychecks with taxpayer dollars?
For example, some hedge fund honcho may give tens of millions of dollars to a foundation that he has created with his college buddy, who runs the show for $2 million a year. Since our hedge funder is in the 43 percent bracket (ignoring their carried interest tax break), taxpayers are effectively picking up $860k of his college buddy’s pay. That’s equal to approximately 500 person-years of food stamps.
Now I want to help struggling foundation presidents as much as the next person, but isn’t there a better use of taxpayer dollars? It doesn’t seem unreasonable to say that if non-profits are going to enjoy tax subsidies that we get to set some rules, such as a cap on what any of its employees can earn.
The president of the United States gets $400k a year. That seems like a reasonable cap for the president and other employees of non-profits. If they can’t find good help for this wage then maybe they aren’t the sort of organization that deserves the taxpayer’s support.
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