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We’ll soon be lectured to by assorted U.S. Representatives and Senators, mainly Republicans, about the urgency of reducing the federal deficit and sparing our grandchildren from crushing debt. These same Representatives and Senators approved a “fiscal cliff” agreement that includes, according to emerging details, the restoration of a tax giveaway that siphons away untold amounts from the federal Treasury and from state and city treasuries as well. This thievery (and that’s what it comes down to) was concocted expressly to shower another tax benefit on the rich, especially the richest of the rich. In a master touch, it’s all being done under the fig leaf of charity. Welcome to the 11th hour rescue of the so-called “IRA charitable rollover”.
“The rule allows many investors 70 1/2 or older to transfer as much as $100,000 a year directly to a qualified charity without having to count any of that transfer as taxable income (italics mine).” So said the Wall Street Journal, in a story that could barely suppress its excitement over the 2012 and 2013 restoration of this egregious tax break.
The Journal could only cheer. The law had “enthusiastic support from influential charities.” In the Congress, “this provision enjoyed bipartisan support.” The Journal’s story failed to mention (because the Journal never mentions such things) that each $100,000 contribution takes away from the public purse the tax revenues from that amount; it never mentions that each $100,000 contribution was built up, likely over decades, in tax-deferred retirement accounts; it never mentions that one of the conditions of that tax deferment was the promise of repayment, through minimum required distributions, of the taxes due on that amount.
And it never mentions the most crucial fact of all: the “IRA charitable rollover” is totally unnecessary. The tax code has long provided a standard deduction for contributions to charities. The rollover deduction simply gilds the lily, and hands one more tax break to people who need no tax breaks.
The charities of course will be thrilled. The donors will get their tax breaks. Only the public gets shafted, in the Congress of hypocrites and thieves.