The last couple of days I’ve been trying to figure out how Bob Dole would balance the budget by slashing government revenues and spending more on the military.
This certainly is not the platform on which he was running in the primaries.
But let’s take him at his word — that he really plans to slash taxes, beef up military spending, and yet balance the budget by 2002.
Yesterday I suggested that cutting tax rates wouldn’t increase tax revenues, but rather, as you might expect, lower them. Also, that ending all foreign aid and funding to the arts wouldn’t make a dent.
So where is all the money going to come from to pay for the tax cuts, the increased defense spending, and balance the budget?
You can do away with government meat inspectors or ask airlines to inspect their own planes for safety . . . you could abolish the S.E.C. or cut back the I.R.S. (but those two actually generate money for the Treasury). You could end farm subsidies (but they’re already being phased out — Congress already did that) and sell the national parks to the highest bidder. But all this stuff if penny ante.
The real dollars have to come from the poor, the ill, the elderly — all the people who are getting the money now. This is where the real money is, other than defense, which Dole would increase, not cut.
And that’s fine, you may say. Let efficient, volunteer-based private charity take the place of wastrel government largesse. If children wind up begging in the street, as they do in so many countries, the good people of America will take them in. Or their churches will. Or their church-run orphanages will. Not for nothing have Newt Gingrich and Bob Dole and Ralph Reed all adopted children. They believe in forcing women to bring unwanted fatherless children into the world, because abortion is murder; but, to their credit, they are among the first to step up to plate and take those kids into their hearts and their homes. (At least I assume they are.)
Or, well, if you don’t adopt the kids yourself, you can contribute money to the orphanages, or pay taxes for the prisons (but local taxes, so it’s OK) they’ll eventually be housed in. Either way, the problem is solved.
But here’s where I get confused. According to the IRS, the average itemized charitable deduction in 1994 was between $1200 and $1800 for itemizers who reported adjusted gross income between $15,000 and $75,000. That’s pretty good, considering how tough it is to take care of your own family’s needs these days on an AGI of $15,000 to $75,000.
Now go up to the $100,000-$200,000 adjusted gross income range. Yuppies, lawyers, doctors. Their average charitable deduction in 1994 was $3,420 — less than 3% on average.
Now go up to the $200,000-$500,000 range. Surgeons, law partners, big-time corporate VPs. They averaged $8,372 — still barely 3%.
Now go up to $500,000-$1,000,000. Republicans. Now you’re talking about enough money to pay almost any basic costs of living, so there’s really a choice in how you allocate your funds between luxuries for your family and the needs of your community. Plus, you are very likely to be able to do your giving with appreciated securities, which makes it a lot cheaper than for the guy paying cash. They averaged $21,582. Still about 3%.
Built into that average you do have a few wealthy bleeding-heart liberal Democrats, who tend to give a lot more than average. (That’s one of the signs of a bleeding heart.) Net them out, and you’ve got rich Republicans giving maybe 2% of their adjusted gross income on average.
The IRS numbers I saw didn’t go beyond $1,000,000, but the trend — a more or less flat 3% — hinted at no change as you continued up the scale.
So here’s my confusion. If Bob Dole proposes to pay for his tax cuts and defense buildup and balanced budget by cutting aid to the poor, ill, and elderly, with private charity taking up the slack — what assurance does he have that this will finally serve to melt the hearts of rich Republicans to start giving more money?
On the one hand, their 15% tax savings will provide them lots of new giveable cash. But on the other hand, the lower tax bite and halved capital gains rate will actually raise the cost of giving. (Today, it costs a rich guy just 60 cents to give a dollar because of the tax benefit. Tomorrow, it would cost 66 cents. Using appreciated securities, the price hike would be even wider.)
My conclusion: the people so anxious for this 15% tax cut are not likely to turn around and give much of it to charity.
How come we don’t hear more about Bob Dole’s adopted kids, anyway? Or Newt’s? Or Ralph Reed’s?
Tomorrow: Gold in the Streets
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That I'm their competition.~Famed hedge fund manager Michael Steinhardt, when asked the most important thing an investor could learn from him.
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