March 24, 2009
President Obama Stands By Proposed Charitable-Deduction Limits
By Suzanne Perry
President Obama tonight stood by his proposal to limit tax breaks for charitable deductions for wealthy people, saying it would have little effect on giving.
“I’ll tell you what has a significant impact on charitable giving is a financial crisis and an economy that’s contracting,” he told a televised news conference. “And so the most important thing that I can do for charitable giving is to fix the economy, to get banks lending again, to get businesses opening their doors again, to get people back to work again. Then I think charities will do just fine.”
President Obama has proposed limiting to 28 percent the tax break couples earning more than $250,000 (individuals $200,000) can get for each dollar of itemized deductions, including charitable donations, starting in 2011. People in the highest tax brackets can now get 33 percent or 35 percent.
Many nonprofit leaders have criticized the proposal on the grounds that it would dampen giving, harming charities that are already under strain from the economic downturn. Others, however, support it because the tax revenue would be used to bring down health-care costs, which they say would benefit both charities and the people they serve. The plan has mustered little support in Congress so far. (See an article from The Chronicle of Philanthropy about the status of the proposal.)
President Obama said his proposal would affect only about 1 percent of Americans and is part of his broader strategy of asking people who have prospered over the past decade to “pay a little more.”
He said it would also help “equalize” the tax breaks for charitable deductions, noting that he can now get a bigger tax break for his own charitable contributions than someone in a lower tax bracket.
“Now, if it’s really a charitable contribution, I’m assuming [the lower rate] shouldn’t be the determining factor as to whether you’re giving that hundred dollars to the homeless shelter down the street,” he said.
President Obama said the 28-percent limit would be comparable to the top deduction rate allowed in the Reagan administration. (Some tax experts say the comparison is not valid, however, since the top tax bracket then was also 28 percent, compared with 35 percent now. The top bracket would rise to 39.6 percent in 2011 under separate Obama tax proposals. That means wealthy taxpayers would be paying higher taxes while also getting a smaller break for their itemized deductions.)
“So I think this was a good idea,” the president said. “I think it is a realistic way for us to raise some revenue from people who benefited enormously over the last several years. It’s not going to cripple them.”
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Not at all surprising given the paltry level of personal giving by Obama & Biden – they only give away OPM (Other People’s Money)
— Brian Archimbaud, CFRE Mar 25, 12:28 AM #
That is fair and measured—I think it is smart.
— D. E. Yarrington Mar 25, 09:27 AM #
I believe all of this is going to lead to a backlash, and that the charities that most need the support are going to feel the fury of those who would have given “freely”. I think contributions will be redirected to sites that do not benefit “poor children” and those the president wants supported, and will instead go to animals, museums, colleges, etc to punish this continued intrusion into our lives.
— jeanne Mar 25, 10:35 AM #
It is about time there was some more equality in the tax system. What people seem to be ignoring is that there is STILL a tax break here – the wealthiest just don’t get quite as big of a break as before. If they stop giving it’s because of their own greed – which I think is the bigger problem here.
— Grace Mar 25, 11:28 AM #
Maybe I’m just being naive, but do you really want donors who are only giving for a tax break? (And yes, as Grace pointed out, there is still a tax break, just a smaller one.) Yes, tax breaks are a nice benefit for donors, but those who truly believe in and support an organization don’t just give money. They tell their friends and their families and business parters, and they can really champion a cause. Yes, money is money, but I wouldn’t underestimate power in numbers either, especially if your organization is working towards widespread, systematic change.
— Janice Mar 26, 01:32 PM #
By imposing these charitable deduction limits while raising tax at the same time, Obama is reducing the amount of extra money taxpayers have to donate in the first place.
It’s not a matter so much of “well I don’t get a deduction, so it’s not worth donating,” but a matter of “well I had to pay all of these extra taxes, so I don’t have much left over to be donating.”
Yes Janice, you are being naive. Charities want any donors. A dollar is a dollar, if it can go toward a good cause.
— Craig Mar 26, 02:11 PM #
As many philanthropists have pointed out the amount of money that foundations are able to supply to the poor is paltry compared to what the government can supply. If the government needs this money to provide universal health care to the poor – and everyone else – then I am all for it. If the government is going to use this money to fight unwarranted wars in foreign countries, then I am against it.
— Joan Mar 26, 03:46 PM #
Reading some of these comments, I wonder how many of the writers are actively involved in Charitable Organizations. Keep in mind that when a major crisis occurs in this or another country, it is always the charitable organizations stepping up to the plate FIRST. The Red Cross, The Salvation Army, Faith Based Groups, other Volunteer organizations. Why then should we expect that the Government is going to step in and handle the situation when they have had a very poor track record of managing ANYTHING. Republican or Democrat. They have ALL messed things up.
Also, If we are going to drop the Charitable Tax Deduction to a lower level to make it more “FAIR”, then shouldn’t we also drop the marginal tax rate for the same reason . . . “FAIRNESS”. It is interesting that many people throw out issues of fairness when what they really mean is “FAIRNESS” to the group or groups of people they feel are deserving according to their own personal frame of reference. For something to be truly equitable, it must be so to all concerned.
— Chris Mar 30, 12:16 PM #
Chris, your comments are a red herring. Maybe we should make sure that wage earners pay Social Security and Medicare taxes an all their earned income. That would probably fix both programs in a short period of time. So, wealthy wage earners are already getting a tax break most Americans don’t get. So, they get this tax break and they should receive a higher tax break on donations, too? That is truly FAIR, NOT!
— Gregg Apr 3, 09:00 AM #
Gregg, your logic about Chris’ post and the SS issue is as flawed as your apparent envy of those who make more money than you. SS and Medicare are capped because the benefits those programs pay are also capped. You wish to use them as a wealth redistribution tool like Obama, rather than the safety net they are supposed to be. The wealthy pay far more in taxes as a % than anyone else. The top 10% pay 71% of all taxes collected, but you would begrudge them a slight deduction (which they don’t get, the charity actually receives the money that is saved) for wanting to direct the money to a charity, rather than letting Barack Obama waste it like his predecessors? Your definition of “fair” seems a little self-serving.
— Factfinder Apr 14, 11:58 AM #