These are policies that President Obama has advocated in the past, so we shouldn’t be surprised to see them in his 2011 budget. Still, it’s hard not to be a little shocked. The budget says, at page 40:
Reduce the Itemized Deduction Write-off for Families with Incomes over $250,000.
Currently, if a middle-class family donates a dollar to its favorite charity or spends a dollar on mortgage interest, it gets a 15-cent tax deduction, but a millionaire who does the same enjoys a deduction that is more than twice as generous.
That’s because the “millionaire” pays income taxes that are more than twice as high. It isn’t “generous” for the government to refrain from taking all of your money. The document continues:
By reducing this disparity and returning the high-income deduction to the same rates that were in place at the end of the Reagan Administration, we will raise $291 billion over the next decade.
This is, of course, Orwellian. The “disparity” is in fact a disparity in tax rates–higher income people pay much more. And the reference to the Reagan administration must have been intended as a cruel joke on taxpayers. The “high-income deduction” will be the same as during the Reagan administration, but the high-income marginal tax rate won’t be, so now the deduction will apply to only half the contribution.
It’s easy to understand the Obama administration’s purpose with regard to churches and private charities, which it regards as competitors of the government. It wants to damage or destroy them by making contributions more expensive. But what about the mortgage interest deduction? The administration purports to be concerned about the decline in home prices that triggered the economic crisis of 2008-2009. But severely reducing the mortgage interest deduction will inevitably depress home prices. And not just the prices of expensive homes, either; as those prices fall, the values of less-expensive houses will decline as well. Is this really what the administration wants? It is hard to escape the conclusion that the Obama administration simply doesn’t care about America’s economy.