While many were surprised that the Supreme Court recently moved from ruling on the actual arguments presented for the Constitutionality of the individual mandate of the Patient Protection and Affordable Care Act (a/k/a “Obamacare”) into creating a justification not presented—that the penalty is in fact a tax—the potential broader unintended negative consequences of the Chief Justice as tax-philosopher have largely been overlooked.
Stating that “taxes that seek to influence conduct are nothing new,” Justice Roberts has now established a rich new precedent for Congress’s reconsideration of the purpose of taxation, and tax-exemption, which should give pause to everyone concerned with the non-profit sector: donors, volunteers, beneficiaries, and those employed in the sector alike.
According to the Chronicle of Philanthropy,
The opinion by Chief Justice Roberts makes it clear that if lawmakers voted to impose restrictions on tax-deductibility or tax exemption, they would not face any constitutional obstacles.
As the article points out, “lawmakers and regulators have traditionally placed relatively few restrictions on what charities could do, or what causes donors could support, as long as the groups directed their efforts toward a broadly defined range of activities generally regarded as charitable.” But as government at all levels is increasingly ravenous for ever-greater tax revenues, it views taxes “foregone” by the charitable deduction with ever-greater lust.
President Obama has floated the idea of eliminating or limiting the charitable deduction throughout his administration (see for example “Obama’s War on Charity“), and mainstream media stories increasingly support the notion that money directed to charities is somehow money “given up” by the government, and tax deductibility should thus be subject to a “public benefit” test.
All of which adds up to the very real prospect of a dangerously politicized change in what contributions would be deductible, and which disallowed. If freedom of conscience is not allowed in declining the mandated purchase of 100% “free” contraceptive, abortion, and abortificant coverage, would one’s weekly offering or contribution to the disaster relief fund of a charity that also upholds an absolute right to life continue to be deductible from one’s taxes?
As the decidedly apolitical Chronicle of Philanthropy points out:
Nonprofits can take solace in the fact that today they enjoy general popularity in the halls of government, but that is not the same as having an independent legal basis of legitimacy. American philanthropy is a creature of the shared understanding among policy makers that its activities are so beneficial to the common good it deserves special privileges. But the Affordable Care Act decision emphasizes that such privileges are ultimately defined by politics, no matter how much nonprofits emphasize that they are separate from government (and business).
Anyone who doesn’t want to face the prospect of a future in which Congress decides whose activities are “legitimate” should be very, very afraid. Just ask Katrina’s victims: FEMA or Salvation Army?