Obama's Charitable Giving Plan

[peterp]

Some charities and nonprofit experts are worried that President Obama’s proposal to impose new limits on charitable tax deductions for wealthy people would dampen giving at a time when charities are under severe strain because of the recession.

Others say it will have little or no impact. What do you think?

[worldhope]

I just finished the on-line transcript and have a few comments:

1) The timing seems very unfavorable.  Even if the changes do not take place until 2011, announcing and passing them in this budget will have a chilling effect.  One more question by a major donor about the merits of a gift is one more question that has to be overcome and another opportunity to miss out on the gift.  Beyond the the direct impact of giving, it will also incrementally increase the time it will take to close a major gift decreasing the productivity of the fund raiser.
2) It is really a surtax on charitable giving.  When combined with the current proposal to increase marginal rates back to 39% at the highest bracket, it will be an 11 cent tax for each charitable dollar given (not the 7 cents mentioned by many in the on-line discussion).  By imposing a tax on a charitable gift it will likely drive some of those dollars to tax shelters.  Donor:  "I would rather not pay the 10% tax now.  I am putting this into Tax Shelter X and I will try to remember you in my estate plan."
3) One theme from the discussion was "just do your job and tell them how great your cause is;" however, this seems simpleminded.  We are all doing that every day, so all things being equal, this proposal will result in a reduction of charitable giving overall.  As Mr. Flessner repeated several times, it will certainly not encourage increased philanthropy at a very difficult time.