The Poor: The Unintended Victims of Tax Hikes

We’ve heard it over and over again like a CD skipping in its player, “to confront the problems of our time, we must take bold and aggressive action.”  Of course, this statement means entirely different things to different people with different ideologies.  For the left, this means more government intervention and opening new revenue streams to pay for those interventions.

In my state of residence, North Carolina, the legislature decided that rather than cutting back as most families in the state have had to do to their personal budgets, they would instead raise the sales, income and corporate tax rates.  Some of the major bills currently pending in Congress, including the healthcare and cap and trade bills, include substantial tax increases aimed at the middle and upper classes.

Politicians who advocate such increases are quick to point out the benefits that will come with these revenues (of course, they always fail to mention how much money is used to fund government bureaucracy prior to assisting the people they intend to assist, but I digress).  Yet, we know from our economics 101 class that taxation is simply revenue distribution, that is, government is using for its purposes what a private citizen might have used for other purposes.  In essence, government is not just taking money from an individual, but it is also negatively impacting whatever industry or service that individual would have patronized had that individual been able to retain control over their own money.

In essence, in any tax hike there are always winners and losers.  The winners are the politicians who can claim that they are “doing something” to remedy our nation’s woes as well as the select individuals who receive the benefits of the revenue redistribution.  The losers, however, are not necessarily who you might expect.  Sure, we know that tax hikes eliminate jobs and make goods and services more expensive, but one area that is often passed over is the effect on charitable giving.  Since charities more often than not provide services for those who struggle the most in our society, it is ultimately the impoverished who must bear the burden of tax increases.

In 2006, the people of the United States gave almost $300 billion to charity, nearly twice as much as the second most charitable country, with 65% of individuals who made less than $100,000 giving to charity.  At the same time, the Charities Aid Foundation found that in terms of percentage of gross domestic product, the people of the United States gave 1.67%, the highest of any nation.  The next highest givers include the United Kingdom (0.73%), Canada (0.72%), and Australia (0.69%).

It should come as no surprise that those who ranked the highest in giving in terms of GDP, ranked 8th (United States), 11th (United Kingdom), 7th (Canada) and 3rd (Australia) on the Heritage Foundation’s 2010 Index of Economic Freedom, while the bottom three the Charities Aid Foundation’s selective study, France (0.14%), Germany (0.22%), and  Turkey (0.23%) scored 64th, 23rd, and 67th, respectively on the Index of Economic Freedom chart.

The data seems to indicate that the less the economic freedom, the less charitable giving as a result.  Raising taxes decreases economic freedom because it limits the ability for a citizen to spend according to individual desires.  As the data shows, individuals desire charitable giving to be a major part of their spending practices.  Therefore, when government takes an individual’s money through tax hikes, the negative effect is less money going to charity, thereby impacting the essential services, mostly geared towards the poor and sick, that charities provide in our nation.

Like most businesses, charities exist to meet the demands of communities.  Charities that grow and thrive the most are usually the ones who are addressing the most pressing needs.  Nearly 75% of all charitable giving comes from individuals.  Tax hikes on individuals, then, negatively effect, the amount of money available from these individuals to give charity.  By raising taxes, politicians are attacking the very core of American giving and are in essence saying that their ideas, often based upon political expediency, are better and that government is more in touch with the needs of the people rather than the charitable organizations that are already engaged in assisting needy people every day and that will continue to help regardless of the political climate.

The needs of our people are too great to put up with this nonsense from politicians.  If they truly desire to help people, then they should be doing everything they can to put money back into the pockets of our people, so that these individuals can continue America’s legacy of always being there to help when their neighbor is in need.  By raising taxes, politicians are hurting the very people they claim to desire to help.