Vice President Dick Cheney appears to have benefitted from the Hurricane Katrina tax relief law for charitable donations unrelated to storm victims. So reports TaxProf Blog, citing information from Notre Dame law professor Michael Kirsh.
According to the VP's 2005 tax return, Cheney claimed $6.8 million in charitable deductions -- a whopping 77 percent of his annual gross income. That's well over the 50 percent limit that would have applied had it not been for the Katrina Emergency Tax Relief Act of 2005, which Congress passed unanimously and President Bush signed into law on Sept. 23, 2005.
The White House press release announcing Cheney's filing says the charitable contribution reflects the net proceeds from an independent administrator's exercise of the VP's Halliburton options. Apparently Cheney had decided in 2001 to donate the net proceeds from the exercised options to charity.
TaxProf Blog writes:
TaxProf Blog concludes:
According to the VP's 2005 tax return, Cheney claimed $6.8 million in charitable deductions -- a whopping 77 percent of his annual gross income. That's well over the 50 percent limit that would have applied had it not been for the Katrina Emergency Tax Relief Act of 2005, which Congress passed unanimously and President Bush signed into law on Sept. 23, 2005.
The White House press release announcing Cheney's filing says the charitable contribution reflects the net proceeds from an independent administrator's exercise of the VP's Halliburton options. Apparently Cheney had decided in 2001 to donate the net proceeds from the exercised options to charity.
TaxProf Blog writes:
The press release seems to confirm, at least implicitly, the VP's efforts to take advantage of the Katrina legislation -- it mentions that the Cheneys wrote a personal check of $2.3 million to the administrator in December in order to 'maximize the charitable gifts in 2005.' Admittedly, I don't know anything about the transactions beyond the info in the press release, but my gut reaction is that the personal check was given in order to make sure the independent administrator had sufficient liquid assets to pay all of the promised charitable contributions before the 50% limit returned on 1/1/06.Despite the importance of the Katrina legislation to the Cheneys' filing, it appears that none of the charitable contributions actually went to Katrina-related charities. The press release lists the three recipients, all designated in the original 2001 agreement: George Washington University Medical Faculty Associates Inc. for the benefit of the Cardiothoracic Institute, the University of Wyoming for the benefit of the University of Wyoming Foundation, and Capital Partners for Education for the benefit of low-income high school students in the D.C. area.
TaxProf Blog concludes:
While there's nothing inappropriate about that from a legal perspective, it does demonstrate how the legislation, which was sold to the public as providing relief to Katrina victims, provided significant tax benefits to the VP (and potentially other wealthy individuals) in situations that have nothing to do with Hurricane Katrina.
-- Sue Sturgis (cross-posted to Gulf Coast Reconstruction Watch)
This "take advantage" notion is mindblowing.
The one-time tax break for donating more than 50% of your income to charity for the 2005 Tax Year did not allow rich people to keep more of their money; they just ended up giving money to charity that they would otherwise have paid to the government in taxes.
Here is the math and let me know if I am wrong (All of this is assuming adjusted gross income BEFORE charitable donations). In 2005, if I had income of $1,000,000 and gave the previous maximum 50% to charity, I would have income of $500,000 to pay tax on. The bracket I would be in is 40%, which means I would pay $200,000 in taxes and I would keep $300,000. If I "took advantage" of the 2005 increase in charitable giving and gave $550,000 to charity, I would have income of $450,000 to pay tax on. I would still be in the 40% bracket, which means I would pay $180,000 in taxes and I would keep $270,000.. That's less than the $300,000 I would have kept if I had given less to charity. It works like that right on down the line.
So the rich did not get to keep more of their money by giving more than 50% of their income to charity in 2005; but they did get to pay less to the government in taxes, which is not the same as keeping more of your money if you had not been permitted to donate more than 50% of your income to charity.
I think the only way to see the 2005 charitable donation change as a benefit to the rich is that they got to give money to what they wanted to give it to, but they did not get to keep more of their money, which is what "benefit the rich" certainly implies.
Finally, because the government takes out much, much more for overhead from tax revenue in translating tax dollars to government services than charities do in translating donations to charitable services, donating to charity gets the donor more bang for their benefit dollar, so to speak.
January 19, 2009 6:26 PM | Reply