E. J. Dionne: Charities draw curious line on health care
Limiting donors' deduction seems a sound way to acquire revenue for coverage. But some do-gooders are saying no.
If the uninsured cannot count on the do-gooders to help them, where else can they turn?
The question arises because certain leaders of our society devoted to civic endeavors moved last week to block a perfectly reasonable way of raising some money to extend health coverage to those who don't have it.
At issue is a proposal by a number of senators to put a cap on tax deductions taken by the well-to-do. Their suggestion wouldn't unsettle existing deductions, and it is far more limited than a similar idea put forward earlier by President Obama.
With the Bush-era tax cuts set to expire in 2011, the marginal rate on the top income bracket is scheduled to rise from 35 percent to 39.6 percent. This affects families with taxable incomes of about $370,000 a year or more.
To help pay for expanded coverage, the senators are proposing that itemized deductions taken by those with high incomes be capped where they are now. So beginning in 2011, people in the top bracket who made a charitable contribution would have it offset against taxes by 35 cents on the dollar, not 39.6 cents. The plan is estimated to raise $90 billion over a decade.
At the beginning of the year, Obama proposed limiting the deduction to 28 cents on the dollar, which would have raised more than $300 billion and solved much of the health-care financing problem.
But Obama's idea was shot down, and now, a group of charitable leaders - including representatives from the Council on Foundations, the American Association of Museums and, shockingly, the American Institute for Cancer Research - wants to kill the new proposal, too.
"With so many Americans relying on the charitable sector," they huffed in a letter released Monday, "now is simply not the time to jeopardize the charitable gifts that are so important to its strength."
There is little evidence that this small change would dent charitable giving, and there is also a problem of logic: When the Bush tax cuts went through, these groups did not complain that donors would be able to deduct only 35 cents on the dollar.
Far worse is the signal this sends: If even public-spirited groups cannot take a modest risk to extend health coverage, how can we expect anybody else to pay a little more for a moral imperative?
Health reform will fail if it includes a mandate that everyone buy insurance but does not provide subsidies large enough to make coverage affordable for Americans in the middle and lower-middle ranges of income. Yes, costs would be held down with a public option, but with or without a public option, decent subsidies are essential.
Subsidies cost money - one reason why it is unfortunate that the president put an artificial ceiling on the cost of a bill at about $900 billion over 10 years.
Nearly everyone forgets a crucial fact: This money will not be added to the deficit. The bills are designed to be self-financing (unlike, say, the Bush tax cuts). The real cost of doing this right is probably closer to the $1.2 trillion price tag in the bipartisan proposal put forward earlier this year by former Sens. Bob Dole, Tom Daschle, and Howard Baker. But whatever number Congress agrees on, the subsidies have to be sufficient and they have to be paid for.
This means that liberal interest groups need to be open to revenue ideas that are not their first choice, such as some form of taxation on high-end health plans. It also means that moderates claiming deficit hawk credentials cannot pretend that unpleasant tax increases can be avoided by holding down costs at the expense of the uninsured and underinsured.
If anyone should understand this, it is the leaders of our charities. Perhaps they will be charitable enough to reconsider their position.