February 27, 2009
Obama's Tax Plan Could Cause Giving by the Wealthy to Drop by Several Billion Dollars Annually
President Obama’s tax proposals — including a limit on charitable giving deductions that could be taken by America’s wealthiest people — could cause giving by America’s wealthy to drop by several billion dollars a year, according to estimates released today by the Indiana University Center on Philanthropy.
The center looked at how the proposals Mr. Obama released on Thursday would have affected giving based on 2006 data showing how much taxpayers deducted for charitable contributions. It said that if Mr. Obama’s tax plan had been in effect, Americans with incomes of $250,000 or more would have decreased their giving by 4.6 percent or nearly $3.9-billion. People at that income level claimed more than $81-billion in charitable gifts in 2006.
The drop in giving is less stark when looked at in the context of how it would affect all Americans who itemize on their tax forms and claim charitable deductions. Total giving by people who itemize would have dropped just 2.1 percent if the Obama plan had been in effect in 2006, the center estimated. Itemized charitable contributions totaled nearly $187-billion that year.
But the center cautioned that giving is far more likely to be affected by the condition of the stock market than by President Obama’s tax proposals. It noted that every time the stock market declines by 100 points, giving declines by $1.85-billion. Charitable donations rise by that same amount when the stock market increases.
President Obama’s proposal to limit charitable-giving deductions would apply to people with $250,000 or more in income. The center said that approximately 4 million tax returns, or nearly 3 percent of tax returns, came from individuals with incomes of $200,000 or more.
In a statement, Patrick M. Rooney, interim director of the Indiana center, said he worried about the effect of the tax change at a time when the downturn in the economy has put a squeeze on many donors and the charities they support.
“Tax incentives do stimulate more giving,” Mr. Rooney said, “and the challenges facing the nonprofit sector in 2009 suggest that this might be a good time to provide additional incentives, rather than reduce the value of the tax deduction for high-income households, so that the donors with the greatest capacity to give have more reasons to do so.”
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I propose that the over $250K crowd be given incentives to support struggling charities by doubling the tax credit allowed for charitable giving. This would help shift the burden of social welfare to charities that are able to more efficiently (vs. our government) spend trusted resources. Under my proposal it would be hard to accuse the benevolant rich of narcissim. If the over $250k rich (supposedly) have margins to burn, give them the option to give the margin away, rather than have it taken away.
— Dr. Glenn Simon Feb 28, 10:45 AM #
Welcome to an Obamunist nation. I work in a Non Profit. Most people I encounter professionally are extremely liberal. They wanted this guy. They wanted the three branches of government to be run by liberal democrats. They laughed at Sarah Palin as being a fool. She’d never have been this foolish, though. Now look at what we have. From each according to their means to each according to their needs. Yes, that’s a successful paradigm. Look at where it has gotten us in the past.
This new President doesn’t stop talking,and what he says is foolishness.
— lilimarlene Mar 1, 05:22 PM #
I agree with President Obama priorities – education, energy and healthcare. While you can argue that he may be trying to do too much at once, the fact is that we have been losing ground in all three areas for some time. Our future truly depends on the US achieving higher levels of education, better and more cost-effective healthcare and developing sustainable energy. With respect to tax incentives for charitable giving, I would suggest to the administration that more aggressive incentives, not a reduction, would be good social policy. Money donated to charitable organizations will not only effectively address some of the country’s key priorities, it will be an investment that supports a critical part of the economy (the nonprofit sector makes up approximately 9% of GDP), one with a host of projects that need to be carried out.
— Kevin Connelly Mar 1, 08:03 PM #
The American public got what they asked for, but at what cost? An “historic” presidency, with someone nearly as clueless as Jimmy Carter.
Yes, Kevin he has cited three areas that merit our diligent attention. Unfortunately, his plans for addressing them are thoroughly misguided.
— Jeff Steele Mar 2, 07:54 AM #
Kevin, I have struggled to think of a single plan or government run entity that runs efficiently and with high success rates. Our education system is undoubtedly broken as many choose private education for their children. It seems to me we need less government in that area rather than more. It is an example of throwing more money at it without results.
Charitable contributions will no doubt suffer with the current state of the economy. The numbers just do not lie.
I pray daily for the current administration. We will have an opportunity as a nation to evaluate their extreme spending in the days to come. Unfortunately those behind us will be paying this debt for their entire adulthood. That is irresponsible and a shame.
— Stephanie Nelson Mar 2, 11:14 AM #
I believe Obama’s plans to punish those who are successful are in direct opposition to the principles our country was founded upon. Punishing those who give to charities and who follow God’s law to tithe borders on evil.
— Amy Jones Mar 2, 05:57 PM #
When we talk of charitable contributions we also talk about the arts. Most artists are liberal and welcomed the Obama presidency. They either were never taught or didn’t remember the stream of Russian defectors in the 1960s from the Soviet Union. The basic reason for the defections: “Artistic Freedom.” The following is from a speech given by John F. Kennedy about the importance of and independent artistic conscience:
“The artist, however faithful to his personal vision of reality, becomes the last champion of the individual mind and sensibility against an intrusive society and an officious state. The great artist is thus a solitary figure. He has, as Frost said, a lover’s quarrel with the world. In pursuing his perceptions of reality, he must often sail against the currents of his time. This is not a popular role. If Robert Frost was much honored in his lifetime, it was because a good many preferred to ignore his darker truths. Yet in retrospect, we see how the artist’s fidelity has strengthened the fibre of our national life.”
In order for artists to maintain their voices we cannot afford to have the arts under the command of government bureaucrats, drunk with their own power.
Francine Paino
— Francine Paino Mar 3, 06:20 PM #
Numerous studies (including ones by the Indiana University Center on Philanthropy) have shown that on average, lower income donors give a higher percentage of their income than higher income donors. So if Obama’s tax policies help lower and middle income donors, could it not end up having a positive net effect on charitable giving?
— Matt S Mar 4, 04:08 AM #
The assumptions are outlandish.
First, the assumption is that charitable giving by these $250k+ taxpayers is going to maintain, which in our current economic climate is not probable. A significant portion of philanthropy is not based solely in goodwill, it’s based in tax advantage. In the boom times, charitable giving was a good way to help offset some of the other taxed areas: capital gains, estate, etc.
It’s not boom time anymore, in case someone didn’t notice.
It’s convenient to blame current administration tax changes for a decrease in charitable giving, but isolating that as a primary reason is ignoring the white elephant.
Charitable giving does not drive an economic rebound, but it will benefit from one. It may not be a painless and victim-free process, but I’m sure if given the option of a short pain period or languishing in our current state for another decade or so, most will tell you to get the recovery underway.
That money not given in the short term isn’t disappearing. It may be saved (strengthening reserves), re-invested (strengthening the market), or spent (strengthening business). Strength in any/all of those areas is going to drive the recovery, and ultimately the return of charitable giving.
— Brian Mar 4, 02:32 PM #
Today they will limit the deductions of those who make above $250,000. Then it will drop to those who make above $200,000. Then, $150,000. One day it will be limited to everyone who makes a donation. This is how it works and where they will take it. Ultimately, there will be no deduction for charitable contributions. Remember how Social Security started and where we are today.
— Gary Mar 5, 11:27 AM #
I along with some 12 million other Americans work for a Non-Profit Charity. The one I work for is 95% donor funded with about 5% government money(Medicaid). We are a residential child services organization based in Florida. We were down almost 40% in donations in 2008 and are already cutting hours of workers and requiring workers to take “days off without pay” for salaried workers. If Obama insists on restricting donations to chariatable organizations by removing the deductibility for tax purposes, he needs to count on possibly losing a third to half of the employees of these organizations to lay-offs. That’s 4-6 million jobs lost. So much for saving or producing 4 million jobs with the stimulus package. This guy really scares the crap out of me and I pray that he or someone in the Democratic Party comes to their senses soon.
— Rich S. Mar 7, 08:15 PM #
Here are how things are changing for us. We will trim our staff by half, with no incentive for working hard for a profit, my husband and I will decide to take it easy and not have to give the government sometimes over 40% of what we earn b/c of what we make. Can’t write off Charity givings anymore, I guess we will make less. Why bother trying anymore, it looks like the government has all the answers and wants to take care of everything…when it should’ve never been this way…where have all the good guy gone? We are being controlled by people with slick tongues and NO values or morals. Because we know charities are counting on us we will continue to give but I fear those who won’t and what will happen. The gov’t wants control, and we are just rolling over and giving it to them.
— Missy M. Mar 24, 09:42 PM #
God’s law? Evil? Preventing people from tithing? Seriously, does God care if tithers get a tax break?
First; The richest givers, especially those who give primarily on the basis of a tax deduction, aren’t generally giving to social service nonprofits that HELP people in need; work with children, create affordable housing, or help people with disabilities or addiction. They’re giving to Theatres, museums,private schools, and foundations.
Second; The largest proportion of private giving is NOT from the uber-rich. It’s from the middle class. Any change that helps the middle class is good for charitable giving.
Third; I don’t see this change having a significant impact on private contributions to any NPO that has average private contributions. If you have a long list of MAJOR donors, you MIGHT see a small impact. It might also have a small impact on foundation grants, but MOST NPO’s are not significantly dependent on this type of funding stream.
Last; This issue is so irrelevant in the bigger scheme of things. People need to understand that, as a society, we are facing a critical juncture in our development. Capitalism has its’ limits and its’ negative impacts, which we are now witnessing. The # of people living destitute poverty, the # of uninsured families, the lack of affordable health care, housing, and food. These are issues that transcend individual needs and/or the collective needs of the rich. The time of blaming the victims is over. These societal problems are NOT the result of stupidity or laziness. They are a direct result of our way of living and the greed associated with global capitalism out of control. We have to fix it now and fixing it requires serious changes. I, for one, am willing to do my part and decreasing my tax benefit for giving is a small price to pay.
— JPF Mar 26, 07:53 AM #