Non-profits to be big winners in Biden’s tax plan

On a private call last week, top Biden administration official David Kamin, deputy director of the National Economic Council, answered questions about the impact that Biden's big tax plan would have on charitable giving. It turns out that the plan "actually increases the incentive to give to charity," Kamin said, according to the New York Times.

Kamin was speaking specifically about the increases in capital gains tax, or the profits on selling an asset. Of the new plan, he said "...it basically says if you want to not pay tax on the gain, the way you do that is to give the property to charity."

Having rich people decide which charities to give their money to instead of forking it over to the federal government is a perfectly fine outcome for the Biden administration, though they have argued for their massive spending plans by saying an increase in taxes would pay for it. If that money goes to charity, the spending plans would be left without an income offset.

The tax plan, "actually increases the incentive to give to charity," Kamin said. "And it basically says if you want to not pay tax on the gain, the way you need to do that is to give the property to charity."

Kamin went on to say that corporations and wealthy individuals not paying is a good thing. "We think it's appropriate that no tax is paid at that point," Kamin said. "But if you choose to give it to your heirs or you choose to use it for yourself, then you should be paying tax on those very large amounts of gains."

The Biden administration doesn't seem to concerned about the rich paying their fair share in taxes, so long as they don't pass on their cash to their heirs, or keep it themselves.

If the administration was worried about this charitable deduction loophole and actually wanted to use the increase in taxes to pay for his spending plans he could have asked for a "cap on itemized deductions for high earners, as he did in the campaign, but such a plan was not included in his $4 trillion economic agenda introduced this spring."

Biden administration officials have said they took the charitable giving that is likely to increase as a result of the tax scheme into account because they intend to raise the tax rate on top earners from 37 percent to 39.6 percent. This would result in "...subjecting more income to a 3.8 percent tax that helps to fund the Affordable Care Act and a variety of efforts to raise more from high-income people who earn money from their investments."

The tax plan calls for almost doubling the capital gains rate for high earners, and an increase on estate taxes, which are the taxes that heirs pay on inheritance.

This likely dole-out to non-profits has not been one of the effects of the tax or spending plans that Biden has spoken widely about. Instead, he has claimed that "We're not going to deprive any of these executives of their second or third home, travel privately by jet. It's not going to affect their standard of living at all. Not a little tiny bit. But I can affect the standard of living that people I grew up with."

Kamin said that "There's a difference between giving an asset to charity, and using it for yourself or giving it or using it for your heirs, and that's what’s reflected in the proposal."

The New York Times quotes tax experts that "agree the net effect of the plans would be an increased incentive to donate."

A senior policy analyst at think tank the Tax Foundation, Garrett Watson, said "When I heard about this proposal, the potential opportunity for avoidance through charitable giving was the first thing that came to my mind. Higher tax rates mean the deductibility with respect to charitable giving is more valuable."

Charitable organizations and non-profits, from universities to arts organizations to humanitarian relief groups will likely encourage their donors to give more if these new tax rates go into effect. Under the Trump administration, Americans gave less to charity and kept more of their money in their own pockets due to his reduction in tax rates.