White House Official Defends Deduction Proposal

May 27, 2009

White House Official Defends Deduction Proposal

An Obama administration official is advising charities not to worry about the White House’s plan to limit charity tax breaks for the wealthy and to keep in mind the “broader context” of President Obama’s plan.

Under the proposal, which has drawn fire for its potential to damage charitable giving, the tax break for itemized deductions would be limited to 28 cents for every dollar spent by couples who earn more than $250,000 (or individuals earning more than $200,000), starting in 2011.

Under the current system, taxpayers in the highest tax brackets can write off the same percentage as their tax bracket, or up to 35 percent.

The administration says the itemized deduction limits would raise $267-billion over 10 years to help pay to overhaul the country’s health-care system.

“To a large extent this proposal has been perceived among the nonprofit community that’s reliant on charitable giving as really piling on,” Jeffrey Liebman, chief economist at the White House Office of Management and Budget, said in remarks to members of the District of Columbia Bar.

“That we’re in a moment in history where, because the stock market has fallen as far as it had, charities are short on resources,” he said. “The folks who charities try to assist have probably greater needs than they’ve had at any time in recent decades. And how in the world could we be doing something that might discourage charitable giving among some of the high-income folks that charities like to target for donations?”

But Mr. Liebman said charities need to keep in mind that changes to the health-care system should reduce costs for charities that currently help the uninsured, and should drive down health-care expenses for small organizations.

What’s more, Mr. Liebman said, scholarly research shows that a rising stock market encourages Americans to make charitable contributions.

“What’s going to determine whether there’s resources out there for high-income people to make contributions to charitable organizations is how the economy does,” said Mr. Liebman. “If our general economic strategy works, and health care is an important part of the economy being strong in the medium to the long term, basically everything is going to be fine for charitable giving. And if it doesn’t, it doesn’t matter what our tax policy is — things are still going to be crummy.”

He concluded: “The broader point here is, getting the economy going, doing health-care reform, are good things that, if they work, everyone in the country is going to be in good shape, including people who may have to pay a little more taxes with these provisions.”

— Grant Williams

Comments

Sure, Mr. Liebman.. And if a frog had wings he wouldn’t bump his rear end when he hopped. What a bunch of marlarkey. If his theory is correct, then let’s make everyone pay a little more in taxes to help pay for a government run health care system so that we can all benefit from more giving to charities. Unbeleivable!!

— John May 28, 03:21 PM #
Mr. Liebman, the government has ruined the Social Security System by stealing funds from it over the years to pay for other things. What makes you think that the American people will trust the government to run the health care system. I trust the market more than the government. Look at all of the people who are now running the government who forgot to pay THEIR taxes or found it difficult to pay. And then there were others who took payments from banks, or got deals from the banks…banks that now have gone under. Quit making people think that the government is doing something for them. You want to give all those people something so that they will vote for you again. Enough is enough. You can fool some of the people some of the time, but sooner or later they catch on to your insincerity. Why keep punishing people who work hard, pay their taxes, give to charities, volunteer to help others, make their mortgage payments, run profitable companies that contribute to communities and much, much more. With the programs of the present government you are making parasites out of those with their hands out. They have been given the same privileges everyone else has been given to get a good education, be responsible and contribute to their communities. I am 80 years old and I have lived through hard times, but this is rediculous. Please think again about what you are doing because you are hurting America…not helping it.

— Ruth Ludwig May 28, 03:46 PM #
Of all the arguments that could be made for this proposal, this one is about as far out in space as one could be. Does he (or the administration) really think the American people and those of us who work for nonprofits are really dumb enough to buy this B.S.?

— John F May 28, 05:27 PM #
It’s really amazing how the rich have once again snookered the middle-class into carrying their water (it all began with the Civil War). These new deduction rules only impact people earning lots of money, people who are wealthy enough to not be swayed into or out of giving based on the deduction rate (they have other factors to deal with, like tanking portfolios).

It does not impact middle-class donors. But what is more annoying about these naysayers is that they are merely parroting the “ask the other guy” mantra that runs counter the entire spirit of community service that the NGO world is all about. We are all in this mess together, and we all have a responsibility to see that Americans have access to affordable health care.

None of these critics have come up with another way of paying for this much needed public service. Frankly, this self centered-ness (“don’t ask me to put any skin in the game”) is shameful.

— Larry Kaplan May 28, 05:52 PM #
I’m surprised that non-profits are not yet on the taxing block.

— Steve K May 28, 05:59 PM #
Larry, Larry.

There isn’t a wealthy person alive who wouldn’t consider giving more than they would typically give if a greater tax benefit were offered.

That’s the point of tax benefits for the wealthy — motivating them to give more than their usual generous gift.

— Kevin Feldman May 29, 08:44 AM #
I really dont think this will be the end of the world. My experience with many high income people who who are “givers” is that the tax benefit is not the major motivator for giving.

Our organization with 500 employees has expereinced a 30% increase in employee health inusrance premiums this year. I support the Obama Administration’s efforts to get these costs under control. Not to mention the “greater good” of providing access to affordable insurance to the 40 million uninsured Americans.

— Sam May 29, 09:58 AM #

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