February 26, 2009
Obama's Plan to Reduce Charitable Deductions for the Wealthy Draws Criticism
By Suzanne Perry
Washington
New updates:
- Several billion dollars could be lost in charitable gifts because of the tax proposal, say philanthropy scholars.
- The White House says that the plan won’t hurt charities, in part because it doesn’t take effect until 2011, when Obama officials expect the economic recovery to have begun.
Original article:
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.
“During the current economic downturn, which has forced nonprofits to do more with less, any proposal which would result in a decrease in private giving will be a disaster for America’s charities, and for those who depend upon them,” said United Jewish Communities, an umbrella group for Jewish social-service charities.
Mr. Obama proposed the new caps on Thursday as a way to finance changes in the country’s health-care system.
In a document outlining his 2010 budget plans, President Obama proposed limiting the value of the tax break for itemized deductions, including donations to charity, to 28 percent for families making more than $250,000. In other words, taxpayers would save 28 cents on their federal income taxes for each dollar donated.
That would reduce by as much as 20 percent the amount wealthy taxpayers could get in tax breaks. Under the current system, taxpayers who are in the 33 percent or 35 percent tax brackets use that rate to claim deductions.
The president says the proposal on itemized deductions — which would also apply to claims such as mortgage interest — would raise $318-billion over 10 years. That money would help pay for a 10-year $630-billion reserve fund designed to help make health care more affordable and available.
Independent Sector, a coalition of charities and foundations, and the Council on Foundations were among the nonprofit groups that lined up to express concern that the proposal would prompt donors to pull back.
But others say the effect could be limited or should be viewed in the context of the broader goals the president is trying to achieve with his budget proposals. (Update: Indiana University scholars estimated on Friday afternoon that several billion dollars in giving by the affluent were probably at stake.)
‘Rebalance the Tax Code’
The proposal to limit the itemized-deduction rate is included in a package of measures designed to free up money for the reserve fund, including reducing Medicare overpayments, cutting drug prices, and improving post-hospitalization care as a way to reduce readmissions.
The plan is an effort to “rebalance the tax code so that the wealthiest pay more,” the document says.
“With this budget, we are making a historic commitment to comprehensive health-care reform,” President Obama told a news conference. “It’s a step that will not only make families healthier and companies more competitive, but over the long term it will also help us bring down our deficit.”
But the idea has drawn mixed reactions in the nonprofit world.
Rob Reich, an associate professor at Stanford University, urges critics to look at the big picture. “Is the good that will be done through health-care reform greater than the good that would have been done with the charitable projects of the wealthy people [who might decrease their gifts]?” he says.
He argues that the charitable deduction increases the inequalities between rich and poor because people with smaller incomes often don’t earn enough to itemize, and if they do they get less of a break because they are in a lower tax bracket.
But Sheldon Steinbach, a lawyer in Washington who represents colleges and universities, says the proposal could have drastic consequences for many groups.
“Any disincentive to charitable giving, especially in the current economic climate, will have an impact far beyond the black letter law,” Mr. Steinbach says. “It will have an exponentially negative impact.”
But while many charitable-giving experts expressed alarm about how reduced rate for charitable deductions would affect giving by wealthy Americans, others say that Mr. Obama’s proposal may be less cause for concern than it initially appeared.
The reason: Many wealthy Americans who would otherwise be in the 33- or 35-percent tax bracket — and thus able to take that same percentage deduction for their charitable gifts — have used mortgage payments and other deductions to qualify for the alternative minimum tax rate of 28 percent, says Robert F. Sharpe, a Memphis planned-giving consultant.
By paying the alternative minimum tax rate of 28 percent, those wealthy taxpayers are already restricted to the same percentage on their charitable deductions, Mr. Sharpe says. “A lot of the rich are already used to the 28-percent deduction,” which means the Obama proposal would not result in any change for them.
For those wealthy individuals who currently qualify for the 33- or 35-percent rate, however, President Obama’s proposal would have some financial impact.
To illustrate, Mr. Sharpe offers the example of a wealthy donor in the top tax bracket who makes a $100,000 gift. The donor currently would save $35,000 in taxes, or 35 percent of the gift. Under President Obama’s proposal, that same donor would save only $28,000, or 28 percent — a difference of $7,000. (Editor’s note: this sentence originally referred incorrectly to the $35,000 and $28,000 as the amount that could be deducted, instead of the amount saved in taxes.)
Mr. Sharpe says the proposal would unfairly penalize the most generous taxpayers since wealthy people who give nothing to charity would not face such a tax increase.
Impact on Large Institutions
Bruce Flessner, a fund-raising consultant at Bentz Whaley Flessner, in Minneapolis, says the plan would probably have little impact on organizations that have a broad pool of donors. But large institutions — particularly colleges and universities and academic medical centers — could be particularly hard hit if the plan moves forward.
“It seems like unusual public policy to try, as the president announced to the Congress this week, to return the United States to world leadership in access to higher education and then make it more difficult for extraordinary donors to contribute great gifts to colleges and universities,” Mr. Flessner says.
“Likewise, it seems like unusual public policy to penalize the great medical centers that contribute so much to scientific breakthroughs by making it more difficult for donors to make the six-, seven-, eight-, and nine-figure gifts,” he adds.
Eric Kessler, who advises major donors and foundations for Arabella Philanthropic Investment Advisors, says the proposed limits would not likely immediately affect the behavior of the biggest donors, who tend to plot their giving strategically. “I think it has an effect over time, but I don’t think anybody’s going to pick up the paper tomorrow and say, let’s forgo our commitment to the local theater group.”
But he says its could affect mid-range donors — say those who give in the $1,000 range — “who are less driven by strategy and for whom the deduction plays a significant role in their giving.”
Michael W. Peregrine, a lawyer in Chicago who advises nonprofit groups, says charities are now facing a “triple play” that could cut into their donations — the bad economy, the proposed charitable-deduction limits, and proposals by President Obama to end tax cuts for wealthy people that were introduced by President Bush.
He says he worries that charities that are hurting for donations will become more vulnerable to fund-raising scams. “What is certain is that the perception that this will reduce charitable donations in the short term is going to draw out the fraudsters,” he says.
Republicans who oppose President Obama’s budget proposal have also taken aim at the charitable-deduction measure. “During this difficult time, charities provide vital support mechanisms for families in need of help, and this budget is a direct assault on the financial resources they require,” Eric Cantor of Virginia, the House Republican whip, said in a statement.
But the proposals will not necessarily change giving patterns, says Giving Institute, an association of consultants in Glenview, Ill., and its research arm, Giving USA Foundation.
They noted in a statement that 53 percent of high-net-worth donors surveyed in a 2006 study for Bank of America said their giving would stay the same, or even increase, if the tax deduction for charitable gifts fell to zero.
Giving Institute members have found that “the most important factor in how much people give is how committed they are to the purpose of the request,” the statement said. Furthermore, giving will increase when wealth is created and “if the president’s plan generates more wealth for Americans then giving will go up.”
Holly Hall contributed to this article.
***
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The proposed reduction in tax deductions will, in my opinion, have an extremely negative impact on charities of all types. This will even affect the decisions that people make to donate assets to both community foundations and to their own family foundations. Statistics show that many charities derive 70-80% of their donations from a small proportion of their donors who are major givers. Most of these donors will be directly affected by Obama’s proposal. Not only will they have less discretionary income because of higher tax rates, but the reduced benefit of charitable deductions will produce a double pincher effect.
We forget that people with incomes above $100K per year already pay more than 60% of the total U.S. income taxes. Press this too hard, and many will decide to de-emphasize private philanthropy. That is exactly what happened in Great Britain in the last century as tax rates climbed. As a consequence, there has been very little private philanthropy there compared to the U.S. To assure a vital private nonprofit sector, let us not make rush decisions on taxation issues.
Hal Merz, President
Paraclete Funding Resources (consultant to nonprofits on grant seeking)
— Hal Merz Feb 26, 12:46 PM #
I think we need to put this into the perspective of overall social welfare. Will society and citizens be better off as a whole if there is a shift from donations to taxes? More than ever, we need look beyond what is best for nonprofits and think about what is best for all of us.
Nonprofit organizations currently rely on only 12% of revenue from private giving and as the article indicates, the largest organizations seem to benefit the most from these private philanthropic sources. In addition, we know from a good deal of research that philanthropic giving is inherently fragmented, elitist, and does not do very well in getting to areas most in need.
I would much prefer that we create institutions that guarantee a baseline of support for citizens in this country (which government can provide and nonprofits cannot do very well) and then look to nonprofits to fill in gaps from there. If this means that we need to ask the wealthy to pay more taxes to make this happen, and that some nonprofits might be negatively affected, that is a tolerable tradeoff.
— Angela Eikenberry Feb 26, 01:06 PM #
Socialist governments are tasked with redistribution of money from the “elitists” to those “most in need”. What is the surprise here?
— Obama 666 Feb 26, 01:18 PM #
Wow, just one more reason I’m glad I didn’t vote for this man. Universal, goverment controlled healthcare doesn’t work and this plan will just take from the most in need. Has anyone thought what would happen if there were no non-profits to fill the void? Don’t discount the power of donations and the associated deductions. Surely, our donors won’t.
— Siobhan Feb 26, 01:58 PM #
I say give the Administration the money and the chance to fix things. Thus far, the charities have not been able to do the job, perhaps because so many charities are simply a tax management mechanism for wealthy individuals and families. Fewer charities would enable the truly philanthropic to give where it makes a more fundamental difference to our country.
— Sharon in Pittsburgh Feb 26, 02:02 PM #
Exactly how many donors would be affected? And what kind of money are we talking about—what dollar amount do these wealthy donors contribute over their tax rate (28%, 30%, etc.)—is that the 31.8 billion per annum average over ten years?
— HB Feb 26, 02:09 PM #
You mean people will have to give out of pure altruism?! * GASP *
What would America be without financial incentives to do the right thing?
— WS Feb 26, 02:13 PM #
This is a fundamentally flawed proposal. The nonprofit sector is the font of social innovation in this nation. The large institutions that will be hurt most by this are the ones working on big picture questions like how to treat/cure cancer, and how to develop cost-effective alternative energy. These institutions win Nobel Prizes and train the leading scholars of the next generation. How can we possibly claim that investing in a government bureacracy is a better use of resources? We can’t. Perhaps a better idea is to offer LARGER tax deductions to the wealthiest should they choose to invest in this universal healthcare fund. As noted, people will find a way around this or they will simply stop giving.
— Luke Peterson Feb 26, 02:13 PM #
I would be glad to give the administration the money and the chance to fix things, but only if they allowed for reauthorization of such money after detailed evaluation of how well they are doing. Problem is, they won’t do that — and once they have made the shift, there will be no turning back after we find out they have completely botched the job. Then where will the charities turn to?
PS. If there is concern as to the fact that charities have not gotten the job done, then why are we holding up the government as our savior? They haven’t gotten the job done either!
— Kevin O Feb 26, 02:13 PM #
Obama- the President whose mandate was to take from the rich and give to the poor.
The USA will never be the same again. As his Chief of Staff recently said, “Never let a good crisis go to waste”.
— Time Build Another Mayflower Feb 26, 02:17 PM #
The president is moving in exactly the wrong direction.
The charitable donation deduction should become a CREDIT, making contributions 100% tax advantaged. The philosophical underpinning is the belief that the non-profit sector can and should replace the federal government in the delivery of certain key services.
Of course this change would lead to tax revenue loss rather than gain as supposed in the president’s proposal which would require the elimination of government programs which would be replaced by those delivered privately in the non-profit sector.
— CMc Feb 26, 02:21 PM #
Honk if you’ll pay my mortgage
— ObamaHood Feb 26, 02:23 PM #
This is really much ado about nothing. The wealthy donors will not be influenced in their charitable giving by the proposed deduction reduction. In many cases due to the AMT effect they already are in a lower bracket. Also, and most importantly, income tax reduction is not the motivating factor in most charitable gifts. Fund raisers must make the case on the merits of their organizations contribution to society.
— JPF Feb 26, 02:25 PM #
I agree with #2 above. This proposal goes along with giving the middle income and poor a break long in coming. What is good for the whole has to control this time instead of what is good for the rich!!!
— john Feb 26, 02:43 PM #
Unfortunately, comment #2 from Angela Eikenberry is ill-informed. She asserts that nonprofits get only 12% of revenue from philanthropy, and that much of philanthropy is elitist. On the contrary, Kim Klein, author of Fundraising for Social Change, concluded that earned income and donations comprise 70% of the revenue of the U.S. nonprofit sector. Earned income includes items like subscriptions, nonprofit product sales and memberships, all of which tend to come disproportionally from persons of higher economic standing.
Now regarding the elitism of philanthropy, the largest single share of donations are made to religious congregations. On the whole, these organizations run 70% of the food pantries and are involved in a substantial proportion of volunteering that benefits the entire non profit sector. I do not believe that Obama, whose spouse was an executive for the charity Public Allies, has thought through the consequences of this proposed tax policy.
— Hal Merz Feb 26, 03:19 PM #
Where is all this anti-Obama, anti-government and socialist crap coming from? Get over it. You are fighting a war against communism and socialism that ended years ago. Newsweek Magazine had it right last week with their cover headline of “We Are All Socialists Now” as we use taxpayer funds, government resources and public support to bail out the private sector after their disastrous mismanagement. #2 and #13 above have it right. It’s not only about nonprofits. Its about our society and 8 years of neglect of issues like health care, education, infrastructure and environment. Nonprofits can’t solve these problems, government working with the public and private sectors (including nonprofits) can.
— Dave Feb 26, 03:33 PM #
Charitable donations to the right organizations DO alleviate our government of certain duties. I work for a non profit. We are a faith-based program working with homeless women with children. We are privately funded yet almost half of our residents are referred in by CPS or local county agencies. We have re-united several moms with their children and ENDED several CPS cases. These are families that no longer needing government services or intervention. A charitable donation to the right program is the most efficient use of anyone’s money. We also accomplish our services at half of what the government would spend. Obama’s plan needs exceptions for programs alleviating the government of these types of social problems.
— Darrell Sarmento Feb 26, 03:58 PM #
I agree with Dave, #16. Frankly, I am dismayed at the narrow minded thinking exhibited in the majority of these comments. I am amazed to see this kind of alarmist attitude in a sector that is striving to improve society through innovative programs and targeted support. I do not believe that this change will have a huge impact on charitable giving but it appears that it will help improve the lives of the people who need health care coverage and other services.
— Tracy Feb 26, 04:25 PM #
Dave #16, you said “It’s not only about nonprofits. Its about our society and 8 years of neglect of issues like health care, education, infrastructure and environment. Nonprofits can’t solve these problems…”
Prove it! How is government going to do something the nonprofit sector can’t? What track record do they have to suggest they’ll succeed? I think the historical evidence contradicts you. Solutions come from the private and voluntary sector, not government.
Government gives us things like the Manhattan project, it doesn’t solve our social ills. I can’t believe you people who will trade anything for the warm fuzzies of a welfare state willing to solve (create?) all your problems for you.
— LP Feb 26, 04:40 PM #
If you want socialism MOVE to Canada. Obama and his cronies are using the economic crisis to foist their nanny state programs and spending.
This is the USA, not a socialist experiment. Those who choose to have a government care for them need to move elsewhere. This experiment will ultimately fail- the question is, will the USA survive Mr. Obama?
— Obama666 Feb 26, 05:03 PM #
The thought of borrowing from my grandchildren to pay for my expenses today is repulsive to me.
What a SAD lot of leaders this country has elected. Rather than make the tough, responsible decisions that should be made, they’ve taken the cowards path of stealing from innocents to pay for our excesses.
Obama is just another politician kicking the can down the road. I fear for this once great nation.
— Obama666 Feb 26, 05:09 PM #
To 21
We are not borrowing from our children and grandchildren, because we are not planning to repay them. We are stealing from them, with Obama leading the gang of thieves.
— helen Feb 26, 05:22 PM #
Don’t Blame Me, I voted for McCain
— Obama Was Born In Kenya Feb 26, 06:19 PM #
Obama’s plan will have a devistating impact on Churches. Faith based organization already provide more social welfare benefits than the federal government and state governments combined. I think this will create more dependence on government
— Steve Skinner Feb 26, 08:09 PM #
Everyone has made good points. I also thinks it is clear that we all have different ideas of what needs to be done to fix some the problems facing our country. However, I would suggest that we all take some time to look at history in terms of how changes in the tax code had affected giving. Correct me if I am wrong, but some of the leading philanthropists of the early 19th century such Carnegie and Rockefeller were giving huge multiple million dollar gifts long before there was a tax write off for them. Also, many studies have shown that tax deduction is at the bottom of reasons why people give. I have yet to met a donor who gives only because of the tax break. True charitable and philanthropic acts are driven by so much more. Additionally, large non-profit organizations such as colleges and universities are very savvy in their fund raising practices. They will always be able to garner the major gifts. Also, donors will find a way to maximize their giving potential. There is always a loophole and you better believe they will find it. So what is my point? Obama is in office now. So to still debate about whether he is on the right track or not is not helpful. Instead of looking at every thing wrong with this, let us look at what is right. How can a nonprofit make this work? How can we maximize the benefits to the communities we serve? This should always be our focus and our goal as we, by virtue of being a nonprofit, are charged to promote the greater good.
— Yvette Kelly-Fields Feb 26, 08:29 PM #
The wealthy will have less to give as Mr. Obama takes more of their wealth to redistribute to the poor that he chooses.
Wealth will also significantly decrease as these policies increasingly tax and destroy the businesses that once made America great.
— ObamaHood Feb 26, 08:38 PM #
Commenting from outside the USA, where no other country’s not-for-profit sector has relied so much on the public teat for its succour, surely there is an opportunity to continue to educate donors re the why they give, irrespective of government tax incentives. I find most north Americans to be generous, caring and quite giving. I am quite sure they don’t do it just for the deduction. What a wonderful opportunity for charities and NFP’s to re-engage with their donors and put their case. Fundraising professionals live for such opportunities, and changes such as this provide a new opportunity.
Obama it seems will get away with a lot for a while, and maybe the NFP sector is an easy hit. If it is only 2% of the population and only a reduction in deductible from 35% to 28%, very astute politics. But again, a great motivation to re-engage with supporters and proclaim why we need their support, today.
— Craige Gravestein Feb 26, 09:36 PM #
one of the greatest tax deductions is the charitable contribution. The ability to voluntarily direct my social capital rather than allowing the gov’t to direct my social capital is of the utmost importance. The gov’t already limits the amount of charity that one may deduct to either 50% 30% 0r 20% depending on a certain criteria.the tax benefit is significantly reduced. changing the law to limit the amout would further curtail the value of the tax deduction, and would most definitely lead to smaller contributions to charity. the last thing we need during recessionary times. if anything the cap or ceilings should be raised to entice those who can afford to give, to contribute during these economic times. that would in my estimation decrease the amount of support many charities and organizations would require from the gov’t. one of the greatest tendencies when faced with financial peril is to become riddled with guilt over how we spend our dollars and becoming too miserly with helping those in need, and organizations that tend to the needs of those less fortunate. regardless of what the law becomes it’s important to continue to support the charities that need us now
— Jon Gassman Feb 26, 10:06 PM #
This increases taxes on the generous wealthy. It does not increase taxes on the stingy wealthy. If the real goal is to tax the rich more, then just increase the tax rate on the top brackets. That would at least treat generous and stingy equally. But the current proposal punishes generosity and rewards stinginess. It is in essence a Generosity Tax.
— Steve Feb 27, 12:15 AM #
For those who think this is a good idea – why not amend the tax code to do all sorts of social engineering? Oh, wait – that’s what’s already happening!
I would rather see the entire tax code abolished than to have lawmakers selectively reward or punish certain sectors and the so-called “wealthy” for the sake of increasing government control. I work, and I have a family – are we not a “working family”?
Did anyone ever get a job from a poor person?
— WhatWouldReaganDo Feb 27, 03:01 AM #
For those saying that this will not affect charitable giving, I disagree. Our small organization (~ $500k) receives over 70% of donations from private individuals. Everyone in the US nonprofit world knows that December is the greatest month for donations. Why is this? People are scrambling for the tax deductions. As our greatest percentage of donors are in the $1k – $10k donations, I am concerned that this proposal could significantly affect our donations for 2009 and beyond. This could make a difficult fundraising season a tad more challenging…
— NonProfitManager Feb 27, 07:03 AM #
For those who think about giving as a tax deduction, please remember that a cash, tax payment still needs to be made on the amount given away. To think of this as a “deduction” shows a lack of understanding. It now costs $135 to give away $100. Under the new proposal, it will cost $142 to give away $100. If you want something to stop, whatever it is, just charge more for it. There will be fewer buyers. I am amazed at the naivete of the people who think this won’t affect charitable giving. Even the most altruistic people will have less to give because the government is taking more.
Givers give to charities precisely BECAUSE they know government is not adequately supporting those interests they want promoted. Does anyone know a charitable group raising money to buy fighter jets?
There has been a lot of backward legislation over the past 6 months but this is the most backward yet. Why make it more difficult to give money to people wanting to serve others? Crazy. The only plausable reason is that our new government believes the hard work of good people serving others is of no value and the hard work of people serving government is the highest good.
— Mike Feb 27, 08:15 AM #
Obama the Usurper is destroying our nation and using fear to sneak his unprecedented changes into law.
It is time for another tea-party folks.
— ObamaSocialist Feb 27, 08:38 AM #
My husband is a lab physician who predicts the following will occur if this budget passes: More gov’t. intervention in medicine means more complicated paperwork and other inefficiences, resulting in higher costs of running a lab and slower delivery of service. Increased costs of doing business,combined with projected lower reimbursement rates will drive our income down. Combine paying a higher tax rate with the loss of over 1/2 of our retirement account, and we will certainly need to reduce our spending across the board, including charitable donations. Does this sound like a stimulus package to you?
— concerned Feb 27, 09:33 AM #
The government has done such a great job with SS and Medicare, why not give them a shot at healthcare? Our children and grandchildren are already supporting those who currently receive SS. We will be hoisting another tax burden on them with nationalized healthcare. Religious organizations and other non-profits are the ones who address the issues that will result from the current economic condition in this country—inability to afford a place to live and inability to afford food.
I agree with #11. If a person wishes to donate money they have earned to a non-profit, it should be 100% deductable. Basically their donation supports programs that the government cannot provide. But, of course, in a socialist state that all changes. The rich are penalized to supposedly assist the poor. Other socialist governments have proven that this does not work.
The aid never reaches the needy because corrupt politicians line their pockets with bribes. Of course, we have no corrupt politicians in this country. Right?
— deb Feb 27, 09:50 AM #
We’ll have to see how this plays out, but I am worried about how this will affect someone like me. My family is not rich by any means. The majority of my family’s paycheck goes to our mortgage. The mortgage interest we pay and our charitable contributions (we usually contribute close to $1,000 a year to various charities) are the only reason we get any refund at all. We make too much money according to the government to qualify for student loan interest deductions, child credits, etc. We don’t pay AMT. If Obama is trying to help the lower class that’s great, but not at the expense of those in the true middle.
— Nicki Feb 27, 12:28 PM #
Re: Ms. Eikenberry’s comment (#2) “Nonprofit organizations currently rely on only 12% of revenue from private giving and as the article indicates, the largest organizations seem to benefit the most from these private philanthropic sources. In addition, we know from a good deal of research that philanthropic giving is inherently fragmented, elitist, and does not do very well in getting to areas most in need.”
Please cite the sources for those conclusions. I’m not sure where she came up with her 12% statistic. The annual report on charitable gifts from the 2008 Giving USA Foundation (AAFRC.org) Report showed $306.39 billion in gifts to charity, with 82.4% coming from individuals or bequests from individuals. The balance comes from corporations and foundations. Perhaps she’s referring to the IRS statistic (SOI) that says 12% of estate assets reported at death are cash? Or maybe she’s making reference to organizations that receive funding through government grants? In any case, making it difficult to give to charity is probably not a way to encourage donors. Even those who don’t do it primarily for the tax deduction, it’s not an insignificant benefit and this may have unintended consequences as donors respond to the changing rules.
— VWH Feb 27, 02:55 PM #
My sign “DON’T BLAME ME” will be going out on my front yard earlier than I expected. We need more exposure of this change on charitable donations. Can Obama contine to make the American people that the only way he will not increase taxes is not raising the percentage income tax on persons making less than $250,00.
— Raymond Kase Feb 27, 02:58 PM #
I agree with #11 wholeheartedly!
— Jojo Feb 27, 03:32 PM #
This proposal (and Obama’s overall plan to target the “rich” is a DISASTER for our charity. I already have donors telling me there is too much uncertainty on what the future holds an therefore they are suspending ALL contributions. Rob Reich from Stanford needs to get out of Palo Alto and see the extrodinary work all types of charities are doing, not just his pet issues.
— Bill Feb 27, 03:59 PM #
Financial gain is not the reason people give. The person in this scenario wasn’t donating $100,000 to save $35,000 on their taxes. And it is unlikely that they won’t give in the future because under this proposal they would save “only” $28,000 on a gift of equal size. People give because it makes them feel good and for a whole host of other reasons. They don’t do it to make or save money. Regardless of the tax incentive, it’s always more personally profitable to not donate at all.
— Tina Cincotti Feb 27, 04:09 PM #
My first reaction to all of this discussion is that most people are trying their best to offer some thoughtful and incisive perspectives on the implications of Washington’s newest, dumbest, unwanted intrusions into public and private life.
I also think it’s very unfortunate, but probably unavoidable, that even this discussion has to become entangled in partisan, political posturing and argument. I did not vote for Obama either, but he is OUR president, and I want so much to have him prove my judgment of him totally wrong. Thus far, he has failed me miserably! This issue exemplifies just why.
Meanwhile, I’m on the same pages as CMc (#11), Hal Merz (#15), LP (#19), and Craige Gavestein (#27). They already covered my own thoughts and concerns.
All of this simply means that we in the nonprofit field are faced with an even greater challenge in making an even more compelling case for our noble causes. If we’re good at it, philanthropy will endure and grow, as it always has!
— Ray Mitchell Feb 27, 04:45 PM #
Why not just get rid of all the ‘social engineering’ tax code provisions dealing with charitible contributions, real estate, what have you and let people behave in what they perceive to be rational? The United States is teetering on the brink with bloated government, bloated regulations, and especially an arcane-complicated income taxe code.
— Snow Crash Feb 27, 06:35 PM #
Clearly there are an awful lot of people without memories and/or without the ability to read history.
In 1960, the top tax bracket was – 90%. Then President Kennedy cut that to 70%. A lot of people started whining about how no one would give to charity because they lost part of a tax deduction. So what happened?
Giving increased.
NEXT – Ronald Reagan – all you Obama haters remember him don’t you – that lousy socialist. He cut the top bracket to 28%. I had been working in fund raising for 5 years when that happened. The world was awash with whiners and moaners who said over and over and over again charitable giving will go down.
AND WHAT HAPPENED?
Giving increased.
Then, President Reagan INCREASED the top bracket to 33% and WHAT HAPPENED? Nothing.
So what’s going to happen now that the top bracket will be lowered to 28% for purposes of charitable deductions?
Will the COMMUNISTS take over?
No.
Will the WHINERS and MOANERS whine and moan?
Of course.
And giving will once again increase. WHY?
Because people do NOT give solely because of the tax policy of this that or the other President.
Do some of you really get paid to raise money? It is shocking to see such an abysmally low level of intelligence from people that get paid to do this.
People give because they have it and they are motivated to give. At best taxes will determine when and how much.
Taxes will NEVER determine IF.
Now quit whining and get back to work.
— Sam Prince Feb 27, 06:40 PM #
Obama has done a great job of reducing us all to welfare recipients. Portfolios of the wealthy no longer exist. Baby boomers may never recover and be able to survive on their dividends, and will never be able to retire. But I forgot, there are no jobs either. So Obamamama now owns all of us. How poetetic. We are now the slaves.
— Virginia Feb 27, 07:41 PM #
Given that I work at a nonprofit, this is very sad. We are now forced to give our money to Acorn – which is a nonprofit who supports Obama and we will not have funding to support the disadvantaged kids that our agency takes care of. This guy who is in the president seat has no idea what he is doing. Its so sad that our children will now suffer while he gives our money to Acorn to get him re-elected and bleed us all dry.
— margo Feb 27, 08:31 PM #
I cannot speak for anyone else, but I know that I have an excellent memory. And I not only have the ability to read history, I’ve been fascinated by it and reading it since I was in the sixth grade.
I was a sophomore in college in 1960, and I remember well what then President John F. Kennedy did to change tax rates and why; it was a classroom assignment to study and understand it.
Once again, I cannot speak for anyone else here, but I’m not whining and moaning at all. Like so many of my fellow citizens, I’m simply watching and trying to understand the implications of what is currently happening in our country.
Like countless others, I’m very concerned that an out-of-control, increasingly bloated federal government and stunningly out-of-control government spending and nationalization of financial institutions are forming a weird backdrop against which such things as radical changes in tax mechanisms, and wasteful social and entitlement programs will have a negative effect on our tradition of philanthropy.
What Mr. Prince (#44) seems to be neglecting is the fact that all of these current backdrop issues did not accompany and exacerbate the earlier tax structure changes he cites.
— Ray Mitchell Feb 27, 11:22 PM #
Just the idea of taking from charity to finance this out of control spending binge is disgusting. It is sick to be shoving universal healthcare down our throats when it does not work anywhere in the world. Since when has the govt run Anything efficient? With donations from individuals we have people helping people but Pres O is hell bent on having as many people as possible dependant on the govt. What kind of damn change are we going for here?
— Jaykay Feb 28, 12:34 AM #
Obable has no idea what he is doing to this once great nation! His lack of knowledge and desire to be on stage as an actor rather than a performer will be the downfall of America.
— Robert Feb 28, 07:46 AM #
For me, as a person of faith, JUSTICE is of more importance than CHARITY. In my giving, I try to work for social change as well as fund those trying to help those left out or crushed by the system.
The tax issue must be looked at through the prism of what will help create a more just society. Our widening gap between the rich and the poor is sinful.
— mennonista Feb 28, 09:02 AM #
Obama’s policies are about lifting the poor and the middle class so they don’t have to rely on the rich for bread. It’s increasingly become a world where the life of the poor is dependent on the kindness of the rich. Not a good thing.
— olga Feb 28, 12:54 PM #
Why is it that so many of us seem insistent on the idea that true PHILANTHROPY is only about the well-off giving a hand-out or a hand-up to the not-so-well-off? Not that there is anything inherently wrong with the “wealthy” providing in some way for their “less fortunate” brothers and sisters. That is true philanthropy, after all.
But, philanthropy also includes the actions of those who give of their resources to provide something uplifting, educational or helpful to the entire larger society. Those who give to build libraries, schools and hospitals. Those who give to sustain art museums, symphony orchestras and historic monuments. All of these are true philanthropists, and all of what they do is rightly called philanthropy. But, their intent often has nothing to do with individual, economic status. Their intent is to benefit the entire society, and that actually represents the true meaning of the word philanthropy.
Finally, what does it benefit anybody, and what does it prove, if the “life of the poor is dependent” on the GOVERNMENT rather than “on the kindness of the rich?” (#51) NOT A GOOD THING!
The tradition of philanthropy is so deeply embedded in our national culture, and the results of our philanthropic habit as a nation are so impressive and amazing precisely because we’ve always been a people who believe that government cannot fix everything and should not be expected to do so!
— Ray Mitchell Feb 28, 01:48 PM #
I make my living raising charitable gifts for a small, private college and am very troubled by this proposed legislation and the argument that reducing the charitable gift deduction will have no impact on private donations. Although tax deductibility is not the motivation for giving, it is very much part of the decision of how, when and how much to give. For instance, planned gifts are structured to maximize tax benefits.
The logic behind “rebalancing” the tax code is flawed and could not come at a worse time for higher education. Families can not afford tuition and can’t get loans, institutional endowments have lost 25-30% of their value, corporate matching funds have dried up, gifts of appreciated securities are almost unheard, and overall giving is already down due to the economy. Who will suffer from additional dis-incentives for donations? Not the wealthy. It will be the students. Most colleges and universities do not have the mega-endowments of the Ivys and rely on donations to fund student scholarship. If these donations are reduced, students will not be able attend college or will graduate with even more debt. If Obama is truly dedicated to accessible education, then he should promote the culture of philanthropy that is distinctly American.
— Barbara Parker Mar 1, 07:41 AM #
I want to put America in bondage by heavy taxation. This is the end. Thank you to all the ignorants who put me in office.
— B. Hussein Obama Mar 1, 08:27 AM #
People are missing the point here. The Government wants to shut down charities. They want total control. Get used to it.
— KansasGirl Mar 1, 11:54 AM #
Let’s cut to the simple truth. This proposed change is meant to increase tax revenue. Period. There is a finite limit to the funds that we all have to live our lives, including our charitable giving and taxes. We have to accept that more tax revenue for the government means that as a whole we will all have to reduce our spending. Period. While many different people may choose many different ways to reduce their spending, it seems certain that in a broad sense charitable giving will be reduced along with all our other areas of spending.
I would also like to point out some twisted logic used in previous comments. When Reagan reduced the top rate, he reduced the top rate we had to pay. That meant less taxes and more money in our hands to spend as we saw fit. It seems pretty obvious as I already explained that more money in our hands means generally more to charities (and everything else). The current proposal is not a reduction in the rate we have to pay. It is a reduction in the rate we can deduct. In other words, a tax increase. Saying that this in any way is the same as what Reagan did is ridiculous.
— Bryan K Mar 1, 12:46 PM #
Obama and his minions want to see the end of private charities. They are in the business of making as many people as possible dependent on the federal government for their well being. Share the wealth by government mandate. Socailist/Communist/Marist state is Obama’s plan for America. He never hid it from us. Some people just chose not to look to deep. He will make FDR and LBJ look like ametures when it comes to government programs.
— John Mar 1, 02:12 PM #
I was poor, lower middle class, middle class, upper middle class, and now well to do. I’m not rich, but I do make a large income. I give a lot of money away. Last year nearly $60,000. My business donated more than 30 tons of food to the poor. I do this because God richly blesses me. The left in this country like Biden and Obama give so little to charities that they want to even control where the money I earned goes. This is not the America of Jefferson, Adams, Washington, and those men who risked their lives and their fortunes to live in freedom. This is Roosevelt, Carter, Clinton and Obama and the party of take from the productive and blame him for all the worlds problems and give to those who don’t want to get up early, stay late, work 6 or 7 days a week. In my case, have 2 or 3 jobs for years. 10 years ago I made 13k for a whole year and had a family of 5 to support. When my hard work pays off there is a Democrat with his dirty hands in my pocket. Americans wake up, you greedy people out there, wake up. You will be destined to servitude your whole life living on the crumbs the Dems give you from my table. Take the bull by the horns and make something of your self. God has blessed us with a system that works and it works for everyone. Not everyone is willing to do what it takes. Why do so many immigrants come here with so little and within a few years have so much. They are willing to work.
— jonny big bucks Mar 1, 02:12 PM #
What a lively discussion! I think the bottom line to it is this – what actions are you going to take to support your position? If don’t like the budget proposal – will you write your legislators? Are you going to talk to friends, and spread the word of the actions they can take? Are you going to dedicate a few more resources this year to help struggling non-profits. I think we are all being called to step up to the plate in ways that put us squarely on the side of the solution. The time to just sit back and complain are gone – the time for ACTION is now.
— aranson Mar 2, 09:18 AM #
First of all non-profits have other ways that they receive charity…volunteers! Let’s compare the hours donated by the wealthy less than 5% of the population to that of the masses. When they don’t get tax credits for it the wealthy see less need to give of their time.
Secondly, it is flawed reasoning to equate that when those who have, have more they will donate, donate more or donate consistently. With tax breaks given the wealthy few in the past 8 years, we have seen no indication that those having more will donate those funds or even invest them in ways that are beneficial to anyone other than themselves. If tax cuts for the wealthy fueled positive economic growth and influenced charitable giving, no organization would have any need after the Bush gifts to the rich over the past 8 years. That simply has not happened as we are living out right now.
It is a shame that those who are given the platform of news and political discussion are so out of touch with how these matters impact our daily lives.
— Leslie I. Thomas Mar 2, 12:04 PM #
For Ms. Eikenberry, Dave, et al. Two things. One, maybe we don’t know how this new government approach will work out – oh, wait, the USSR and China already tried it. Didn’t work. Two, Lyndon Johnson tried it. Asked Congress to give him the money for his Great Society program and we would eliminate poverty in our lifetime. Well, Congress did – and many mulitplied billions later, it still hasn’t worked.
As for the non profits, ask the people of the Louisisana and Mississippi gulf coast who was first on the scene and who is still there helping restore the area.
— Bob Stith Mar 2, 04:33 PM #
Obama will be judged for this and his abortion stance.
— God Mar 2, 06:31 PM #
My pastor was at my house tonight. After letting one pastor go and cutting our entire church’s salary by 30% I was moved to work together to find ways to make us more efficient. I give thousands to my church becuase that is where my heart is. Why have we given one man the right to take my money and give to another person for his health care. I appreciate the gesture, but it’s not your money Mr. Obama. You did not earn my money. You are taxing 70% of what I make. 39.5% fed. 9.85% california. 2% medicare, 7% social security, 9.75% sales tax. Isn’t that enough. Seriously, do you have to take my pastor’s salary to support your world views? Please people, stop this from happening.
— Scott Mar 2, 11:19 PM #
Well,
our current family donations will be stopped if/when this is enacted. That money will now be going to President Obama as we enter the 39% bracket. My feeling is we are being told the government can take care of the charities better than the private sector.
— P Lang Mar 3, 08:03 AM #
This is evidence supreme that we have an evil president bent on the destruction of personal success and individual liberties for the seduction of government controlled… everything. Someone motivated to give more to help the homeless because they feel that a local organization can do it better than the government and they will get the tax deduction, will now only have one reason for it (helping people) and one huge one against (It costs more than a dollar to give a dollar.)
The only point to this is to make homeless people (and others dependent on charities) solely dependent on the government so that the socialists in power can make sure they vote for the ones in power.
GRRRRRRRRRRRRRRRRRRRRRRR!
That is …. too angry to type.
— Jeff Mar 3, 01:01 PM #
Let’s cut to the simply truth. this has nothing to do with tax revenue, charities, or the gap between the rich and poor. This is all about gov’t control. PERIOD. Don’t be fooled.
— TA Mar 3, 01:03 PM #
I’m not sure anyone has said it better than WS in post #7.
I found the very last paragraph of this piece most encouraging:
Giving Institute members have found that “the most important factor in how much people give is how committed they are to the purpose of the request,” the statement said. Furthermore, giving will increase when wealth is created and “if the president’s plan generates more wealth for Americans then giving will go up.”
— TB Mar 3, 03:26 PM #
After reading some of the comments, I believe some are missing the point. This isn’t about more money or less money for charities, or more money or less money for the government to give to charities. It is about our liberty. This takes another freedom of choice away from me, the taxpayer and gives it to the government. What is the role of the government? We may as well tear up those framing documents. Whether you voted for Obama or McCain, surely this offends people who believe we should think for ourselves and make our own decisions. Yes, I know what charities I want to support, and I know best what to do with my money. The case that the government knows best what charities should succeed and which ones should fail should not come into question in a free society. Has this administration stopped to think how many more jobs would be lost if this proposal becomes law?
— Kristen Mar 3, 04:31 PM #
#16, remember “One of the methods used by statists to destroy capitalism consists in establishing controls that tie a given industry hand and foot, making it unable to solve its problems, then declaring that freedom has failed and stronger controls are necessary.” —Ayn Rand
— vixxter Mar 3, 05:32 PM #
We need to start paying for our government’s expenditures. If it means those in the top brackets have their charitable deductions a little less favored over those in the lower brackets, tough. I give thousands a year myself in charitable contributions and I’m in favor of this. And for the person above who states that Obama is taking 39.6% of his income, familiarize yourself with how tax brackets work or hire a competent CPA.
— sj Mar 4, 12:30 PM #
I constantly hear or read that “People who are motivated altruistically will do their deeds regardless of any charitible deduction”…if you believe that, you are living in denial. Personally, I contribute more than $50K per year to charities and will surely reduce that amount if such limitations are imposed. In the end, this hurts those who need it most. Again, it goes back to the individual making the choice to give their income to others, not a government who is unable to maintain their own shop making the choice for them…how about making sure those who owe taxes (like recent gov’t officials) actually pay them.
— M Mar 4, 04:00 PM #
I don’t have any experience working with the rich, unlike some people commenting here, but I would be surprised if tax deductions are a major factor in their charitable giving. I gave just as much to charities before I itemized as I do now. The tax treatment is irrelevant; I give because I believe in the causes. Are the rich really that different?
I realize that these times have everyone on edge, but we have really reached the point of ridiculousness when people react to a tweaking of the tax code as a sudden eruption of socialism. I hope that most of those commenters are ax-grinding visitors from the blogosphere and not serious professionals from the philanthropic field. Is a seven percent change in the deduction rate the difference between free-market nirvana and the bottomless pit of socialism? Hardly. If you want to rail about the dangers of socialism, you are making an extremely old and dated argument. There have been socialist aspects of our society for a long time, including the income tax, Social Security, the GI Bill, FHA loans, and Medicare, not to mention occasional financial cleanups at taxpayer expense (like after the S & L crisis that occurred under the sainted Reagan). The truth is, we have had a mixed economy for almost a century now. Yet somehow, the rich endure, and in fact get richer. I’ve never heard anyone deny that the rich have gotten richer over the last several decades. If socialist intrusions in the market economy are a negative, it’s certainly not because they have been hurting the rich. The rich are evidently pretty good at protecting their own interests.
Voters asked for change, and that’s exactly what Obama is trying to do. In addition to the current crisis, our nation has many other looming problems that no one prior has had the guts (audacity?) to tackle. Critique his proposals by all means, but do so in the context of reality. Don’t expect to yell “socialism!” and have that be enough. That’s water under the bridge. In today’s crisis environment, if you can’t be cogent and constructive, you’re going to end up being irrelevant.
— Matt Mar 4, 05:59 PM #
when will 54% of americans learn that socialists believe they are better suited to distribute hard-earned wealth than individuals. you can bet your ass this is going to change our giving habits. we are facing the biggest ideological crisis we ever have. repeat after me and the founding fathers “big government is bad”
— rivancevich Mar 5, 01:52 PM #
This is not about increasing tax revenues by lowering deductions, this is purely about the government posturing to sweep in and “rescue” non-profits by taking them over, or at least controlling them by controlling their cash flow. Where will this lead?…to a greater welfare state, no private colleges, and federally controlled religiously based charities that support the lowest class of people. I wonder how long it will be before our kids are reading the Communist Manifesto in high school civics classes?
— Eric B. Mar 7, 11:09 PM #
#21 and #22 said it all for me. I find this all so incredibly sad, what is happening to my children and future grandchildren.
The health plan might benefit the young, but the elderly will forego many beneficial procedures and medications that may improve their quality of life. They’ll be told to just “get over it”. A health care czar leading all doctors when it comes to the care of patients is beyond scary. Getting insurance companies under control will help so much more.
— Ohio4Mom Mar 10, 09:28 AM #
The people above who comment that a charitalble deduction is now worth only 28% to people subject to the Alternative Minimum Tax forget an important point- the effect of the exemption phase out. Because every $1 increase in alternative minimum taxable income causes a loss of 25 cents in exemptions, the EFFECTIVE tax rae for each lost deduction is now 35% (i.e. 28% + 25%X28%). Admittedly. once the exemtion gets completely phased out (couples making over approx $350,000 )at that point the deduction is only worth 28%. However,for people below that is usually 35%
— Al Edly Mar 10, 11:30 AM #
Well, i voted for mr. obama and i am a volunteer for a nonprofit charity organization, and i agree with him. All i see is that the rich won’ts to stay rich and the poor stay poor.Put your self in those shoes if you couldn’t afford healh care, and working on a mim wage job. would you still think like that. If you are rich i don’t think it would hurt your pockets.I am glad that i am not rich,but the little money i have i give from my heart. The bible says a rich man have a harder time getting into heaven. You are really mad because obama is for the poor. Money will take you a long ways on earth but it can’t buy you a one ticket to heaven. If you ask me all the rich need to give to the poor, and stop being selfish,greedy and tight.
— connie Mar 14, 08:45 PM #
Is Obama’s real agenda here to cause the collapse of the Non-Profit system in America so that more of those served by these charities must then rely on the government for assistance. Isn’t that how you create the next dependent class? Call me cynical but at least do your homework and look at the latest budget and which federal departments received the largest % increase. See where HUD came in and what will the ACORNS of the world receive.
— ron Mar 15, 09:50 PM #
The president says the proposal on itemized deductions — which would also apply to claims such as mortgage interest — would raise $318-billion over 10 years. That money would help pay for a 10-year $630-billion reserve fund designed to help make health care more affordable and available.
We are being taxed into a recession and as far as I’m concerned it’s time for another boston tea parts where everyone pays a flat 10% tax that will take care of their total obligation and NO other taxes on anything for any reason. If the state and the feds can’t run the country of the flat 10% then shut the SOB down or reduce its size until the 10% is all they need.
— nvrpc Mar 18, 10:52 AM #