• October 26, 2014

Limits on Charity Tax Breaks for Jobs Bill No Longer Likely

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Richard White/Chronicle of Philanthropy

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Richard White/Chronicle of Philanthropy

Washington

President Obama’s plan to pay for a jobs bill by limiting the tax break wealthy people get for their itemized deductions, including charitable gifts, appears dead—at least for now.

Senate Democrats have rejected that proposal, releasing legislation Thursday that outlines an alternate way to cover the bill’s $447-billion price tag—a 5.6-percent surtax on income that exceeds $1-million. Mr. Obama says he endorses the new approach.

“We’ve always said we would be open to a variety of ways to pay for it,” Mr. Obama said at a news conference Thursday. He said he still wants to find ways to overhaul the tax code to make it “fair and just,” including closing loopholes.

However, he said, “in terms of the immediate action of getting this jobs bill passed, I’m fine with the approach they’re taking.”

As part of the jobs bill outlined in September, Mr. Obama proposed limiting to 28 percent the write-offs that high-income people can get for their itemized deductions—compared with today’s maximum of 35 percent. His plan would apply to people with adjusted gross incomes of at least $200,000 ($250,000 for married couples).

But Sen. Harry Reid of Nevada, the majority leader, and Sen. Charles E. Schumer, Democrat of New York, said this week that they would rather have millionaires foot the bill. Senator Schumer said that in high-cost regions of the country, couples earning $250,000 should not be considered rich.

Senator Reid has scheduled a vote on the jobs bill for Tuesday. Because Republicans have always rejected the idea of limiting the charitable tax break, it is highly unlikely that the Republican-led House will revive the idea when it votes on the bill.

However, Mr. Obama has proposed curtailing the value of itemized deductions four times now, so nonprofit leaders who oppose the plan worry that it could re-emerge in another form. For example, the new Congressional “super committee” on deficit reduction must find a way to pay for at least $1.2-trillion in budget savings over 10 years.

“Similar misguided attempts to cap or eliminate tax incentives for charitable giving could also surface as Congressional tax-reform efforts begin in earnest,” Diana Aviv, president of Independent Sector, a coalition of charities and foundations, said in an e-mail to supporters.

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