Obama's Budget Speech

(The transcript can be found HERE)

Do only the 'rich' donate to charities and buy houses? Is the reduced deduction meant to put more government control on where charitable monies go?

QUESTION: Mr. President, are you -- 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?

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 in times where supposedly we were in the middle of an economic boom, as a practical matter, their incomes didn't go up. And so, 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 -- 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 $100 to the homeless shelter down the street.

And so this provision would affect 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'd 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 $100. 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.

Maybe they should be taxed at the same rate too. Wouldn't that be 'fair'?

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