It’s called the law of unintended consequences. Like the law of gravity, we all have experienced it and feel its effects.
You buy a larger home. You are excited about it, until you get that first electric bill, your homeowner’s insurance bill, and the property tax bill. You didn’t see that coming. That new job requires many more hours and more travel than you thought when you accepted the position. Now things at home are not going so well because of your absence.
Unintended consequences happen also in government. We go to war in Iraq to get rid of the cruel and dangerous dictator, Saddam Hussein. That happened, but now with Muslims in complete control of the country, a once vibrant Christian population has pretty much been eliminated.
Another example of government and unintended consequences is in education. Government required education “report cards” on schools and teachers are now used to evaluate student performance in the classroom. An unintended consequence is now the often emphasis on testing and its results, rather than actual learning by the student. It’s now “teaching the test,” rather than teaching the child.
Last month, the U.S. Congress passed a massive tax reform bill. The bill makes drastic changes in lowering tax rates for corporations. The bill also reduces the rate some for individuals, while raising the standard deduction. Proponents of the bill say that it will boost the American economy, bring back jobs from overseas, increase wages, and create new jobs. Opponents of the bill say the tax changes will dramatically increase our already out of control national debt, and will hurt government programs that many depend on. By the way, isn’t it interesting to see those who were strongly in favor of massive government spending during the Obama years now so concerned about the national debt?
Well, as they say, time will tell. But one thing for sure, with a tax bill involving so much change, there will be unintended consequences. But what they are, no one can be certain. (I suppose that’s why they are called “unintended.’) But here are a couple of possibilities.
The lowering of corporate tax rates is said will encourage expansion and job growth and creation. But corporations might end up using those millions to modernize their operations by automation, which may lead to little new job creation, and may, in the end, actually cost jobs.
Another possible unintended consequence of the tax bill which is already concerning many, and it should concern any who are involved in a charitable organization, like a church or a civic group. It’s the lowering of the tax rates on individuals and the dramatic increase in the standard deduction for individual filers.
For years, taxpayers have used charitable giving as a major part of their itemized deductions on their income tax return. But now, with the standard deduction being raised to $24,000 per couple, and $12,000 per individual, many taxpayers will no longer need to file an itemized income tax return. And many involved with charities are concerned.
The source of concern is how the tax bill is expected to sharply reduce the number of taxpayers who qualify for the charitable tax deduction — a big driver of gifts to nonprofits. The Council on Foundations estimate that charitable donations will fall between $13 billion and $24 billion next year. That decline is expected to be concentrated among gifts from the middle of the income scale, who will no longer benefit from itemizing their return.
Organizations that depend on donations are worried. Steve Taylor, senior vice president of the United Way stated, “We’re very concerned. A lot of charities are in shock. Charities feel totally blindsided and like we have been thrown under the bus” from the changes in the tax overhaul.
Of course, people will still continue to donate. But how much? The charitable deduction was included in the tax code as an incentive for taxpayers to give. (Why do you think the big income month for charities is December, the end of the year?) Many who no longer having that incentive may still give, but not quite as much. Will the amount be large or small? It could possibly reduce a church, civic, or nonprofit organization’s income only by a small amount. But is it a small amount they can afford to do without?
The new tax bill may deliver the promise of prosperity that is touted by its promoters. But will there be unintended consequences that, in the end, outweigh its benefits? As they say, only time will tell.
Mac McPhail, raised in Sampson County, lives in Clinton and can be reached at [email protected]