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Paul Ruth

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To Give or Not to Give, Is That Really the Question?

Posted: 12/30/11 12:31 PM ET

The end of the year can mean many things to many people, but for Michigan charities this year means the end of considerable tax credits for those who give to them. The restructuring of the Michigan tax system, led by Governor Synder, means the end of the Michigan Business Tax, but leaves many critics questioning the tax on pensions, cuts to education, and the end of many charitable and industry tax credits and incentives. Some dismiss the rhetoric on the charity tax credits claiming that they don't have a major impact on giving one way or another. Most likely people and companies give for primary reasons other than how much they can save, but creating a tax system that fails to reward those who do give is upsetting.

It is important to remember that the end of these credits is a tax hike. Even if people were unaware of the savings in the first place, it was an added sense of gratification at tax time. It is can be easily justified in the logic that people who have money to give to charity can still give and pay their taxes, but how much spending does this take out of the economy? It is reported that the cutting of charitable credits will save the state hundreds of millions that would have otherwise not have been collected. All the money in the economy has to go somewhere whether it is saved, spent in stores, given away, or invested. In this case, more money is going to the government.

An interesting recap on how the state has changed the tax structure will show the end of some incentives, but a major cut in taxes to business across the state. This is designed to incentivize business to hire and expand, but economic expansion is driven by an incentive to invest powered by the profit motive. The government just giving money to business doesn't mean that there are any more orders to fill, or any more consumer dollars to buy things. Until the governor can prove that the demand of the economy will spur business, then he should not ignore the demand for charities trying to alleviate suffering.

In simple argumentation, I claim that giving to those in need is just the right thing to do. Some say that there is no need for the government to offer rewards to get people to give, but if tax breaks are a reward, then what are we rewarding businesses for? Businesses are important to the functioning of society, in many ways they are the life blood, and creating a tax structure contrary to their benefit is unwise. However, this is not an issue of businesses. It is an ideological shift changing the very nature of the state. This is not a dualism between socialism and free market, but the goal of allowing capitalism to prosper is an old American debate going back to the trust-busting Teddy Roosevelt.

The goal of a government tax system is to create as many consumers as possible, which keeps businesses strong. The needful care of the most vulnerable must be a high priority in order to prevent the widening separation between the rich and the poor. Maybe tax incentives to give isn't the right way to do it, but assuming that simply cutting taxes to business and rolling back on public services will create a better livelihood for all is naïve. Synder's tax plan may be simple and efficient, but the word fair means different things to different people.