Among those shocked by President Obama’s 2010 budget, the most surprising are the true-blue liberals who run most of America’s nonprofits, universities and charities. How dare he limit tax deductions for charitable giving! They’re afraid they’ll get fewer donations, but they should be more concerned that Mr. Obama’s policies will shove them aside in favor of the New Charity State.

What did these nonprofit liberals expect, anyway? Mr. Obama is proposing a vast expansion of the entitlement state, and he has to find some way to pay for it. So logically enough, one of his ideas for funding public welfare is to reduce the tax benefit for private charity. His budget proposes to raise the top personal income tax rate to 39.6% in 2011 from 35%, and the 33% rate to 36% while reducing the tax benefit from itemized deductions for the top two brackets to 28% from 35% and 33%, respectively. The White House estimates the deduction reduction will yield $318 billion in revenue over 10 years.

From the Ivy League to the United Jewish Appeal, petitions and manifestos are in the works. The Independent Sector, otherwise eager to praise the Obama budget, worries the tax change “could be a disincentive to some donors.” According to the Center on Philanthropy at Indiana University, total itemized contributions from the highest income households would have dropped 4.8% — or $3.87 billion — in 2006 if the Obama policy had been in place. That year, Americans gave $186.6 billion to charity, more than 40% from those in the highest tax bracket. A back of the envelope calculation by the Tax Policy Center, a left-of-center think tank, estimates the Obama plan will reduce annual giving by 2%, or some $9 billion.

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Labour’s tax credits have caused thousands of families to break up, an authoritative study said yesterday.

The flagship scheme is blamed for a doubling of the divorce rate among low income parents with young children.

Tax credits, introduced a decade ago to cut child poverty, were supposed to help single mothers and hard-working families.

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Roberton Williams, senior fellow at the Tax Policy Center, said it’s impossible to calculate the exact effects of all the tax changes, but said the overall result is clear – less philanthropic giving.

“This will lead people to give less to charities if they behave the way they’ve behaved in the past,” he said. “We’ve already seen a drop in giving as a result of the economic collapse. On top of that, this will just reduce the amount of giving.”

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In his 11 years in the Washington Legislature, Representative Mark Miloscia says he has supported all manner of methods to fill the state’s coffers, including increasing fees on property owners to help the homeless and taxes on alcohol and cigarettes, most of which, he said, passed “without a peep.”

And so it was last month that Mr. Miloscia, a Democrat, decided he might try to “find a new tax source” ”” pornography.

The response, however, was a turn-off.

“People came down on me like a ton of bricks,” said Mr. Miloscia, who proposed an 18.5 percent sales tax on items like sex toys and adult magazines. “I didn’t quite understand. Apparently porn is right up there with Mom and apple pie.”

Mr. Miloscia’s proposal died at the committee level, but he is far from the only legislator floating unorthodox ideas as more than two-thirds of the states face budget shortfalls.

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