Treasury Secretary Timothy Geithner, asked today if the administration’s proposal to cap the value of charitable deductions would hurt charities, said it would depend on the state of the economy.
“It depends on what else is happening,” he told the Senate Budget Committee in response to a question by Sen. Lindsey Graham, Republican of South Carolina. “The most important thing you can do to affect charitable giving is to get this economy back on track.”
Senator Graham responded: “I think the most important thing you can do is reward it when it’s done.”
That brief exchange took place during a hearing by the Senate Budget Committee on President Obama’s 10-year budget strategy.
The president has proposed limiting tax breaks for itemized deductions for families making more than $250,000 in 2011 as a way to raise money to help reshape the country’s health-care system. In questioning Mr. Geithner, Senator Graham referred to a study by the Tax Policy Center showing the proposal, in conjunction with a plan to raise the top income-tax brackets, could depress annual giving by $9-billion in 2011.
The administration has argued that the limits would affect a very small percentage of households and would not take effect until the economy is expected to be in recovery.
But the plan is running into some resistance in Congress, especially among Republicans.
“I question the wisdom of providing any disincentive for giving during this economic crisis,” Sen. Charles E. Grassley of Iowa, the senior Republican on the Senate Finance Committee, told a legal seminar this week. “Or for that matter, I’m not an advocate for changing the tax deductibility that we have and putting limits on it. I think it serves a very good purpose.”
Sen. Max Baucus, chairman of the finance committee, has also said he wants to explore alternatives to the cap on itemized deductions, mainly because he believes the administration should try to raise money from within the health-care system itself. The Montana Democrat has proposed capping the dollar amount of employer-paid health-care benefits that employees can exclude from income taxes.
