In today’s national debate over big government, fairness, and redistribution, simple arithmetic may pose the greatest threat to philanthropies like the Jewish Federation of Greater MetroWest.
The United States government is currently running an annual deficit of approximately $1.1 trillion. Assuming the Republicans agree to $1.6 trillion of new revenues over 10 years, which is doubtful, where is the remaining $940 billion required to balance our annual budget going to come from? The answer, in addition to some spending cuts, is even more taxes. If life were only that simple.
MetroWest was built, and is sustained, by a group of dedicated wealthy individuals (and many others no doubt) of charitable bent. As federal income tax rates climb, residents of blue states, like New Jersey, with its high state income taxes, continue to migrate to red states like Florida.
Similarly, New Jersey’s top estate tax rate of 16 percent forces many wealthy residents to “die elsewhere,” resulting in less income taxes paid to New Jersey while they are still alive. (The $400 million New Jersey collects in estate taxes every year needs to be offset by the income taxes it fails to collect from residents who moved out of state. Does that make NJ a net loser?)
As more of the wealthy depart for more tax-friendly jurisdictions, in many instances they direct their charitable giving elsewhere, often resulting in less funding for MetroWest.
Perhaps even more harmful, if not catastrophic, would be new federal limits on itemized deductions for either state and local taxes or charitable contributions. If applied to the former, this would further increase the total tax bills on the wealthy, making change of residence even more financially attractive. If applied to charitable contributions, this could be a disaster for the culture of private philanthropy that has not only characterized American life and culture from inception, but distinguishes us from Europe and other less charitable regions.
Only recently have charitable organizations begun to lobby to save the charitable deduction from being subject to limitation (see page 3). While this issue remains unresolved, having it part of a national discussion is foreboding. A limitation on charitable deductions will require non-foundation dependent charities to redo their budgets. When a “progressive” government thinks it can do a better job at implementing their concept of tikun olam, it places charitable organizations like the Jewish Federation of Greater MetroWest in the crosshairs.
Big government's call for “fairness” attending the search for more revenue is implicitly divisive. To most Americans “fairness” means equality of opportunity. To progressives, it means equality of result.
If the country is in a bind, it may be the moral thing to do to ask the wealthy to pay even more before we ask those worrying about meeting their next rent check or mortgage payment to pay more. However, it is quite another matter to say that the wealthy must pay more so they can then be said to pay their “fair share.” (Currently, the top 1 percent makes 17 percent of all income but pays 37 percent of income taxes. Sound unfair?)
This is very dangerous talk, creating “victims” (those paying more than their fair share) and “perpetrators” (those not paying their fair share). This is class warfare plain and simple, especially when combined with accusations that the wealthy do not play by the same rules.
Such class warfare is pernicious. First of all, the wealthy do not decide what they pay in taxes or what rules they follow — Congress does. Second, no community should tolerate their politicians sowing social divisiveness, especially if that community is a minority that has historically suffered when social strife hits the body politic.
For all these reasons, and many more, the growth of government presents serious risk to institutions like MetroWest. People, especially those who are the recipients of MetroWest’s largesse, should be careful what they wish and vote for. They should recall what Margaret Thatcher said about socialism, that eventually you run out of other people’s money to give away.
The MetroWest federation is a great example of an institution that mediates between the individual and the government, otherwise referred to as civil society. Policies which grow the leviathan of government at the expense of civil society are suspect at best, highly destructive at worst.
As with many things in life, unintended consequences often play far more important a role than ever contemplated. It would be no small tragedy if, in addition to current trends in assimilation, changes in tax law brought about by the growth of government came at the expense of institutions like MetroWest and the great work it has done over the decades. We are on notice.
Martin J. Gross lives in Livingston. The opinions expressed here are his own.