May 11, 2009
Obama Continues to Promote Limits on Charitable Deductions
President Obama is sticking to his proposal to cap the federal tax breaks wealthy people can get for itemized deductions, including charitable donations, in his final budget plans released today.
As The Chronicle of Philanthropy reported on Saturday, Peter Orszag, the White House budget director, restated the administration’s defense of the controversial plan, which seeks to raise money for a reserve fund that will help pay to overhaul the health-care system.
Mr. Obama last week issued his detailed budget proposals for spending by program in the 2010 fiscal year. Documents released today include historical data about the country’s fiscal policies and project the impact of proposed spending and tax policies through 2019.
See this article from the Chronicle’s archive to get background and analysis about the proposal.
Comments
Commenting is closed for this article.
Previous: Grant Makers Pledge $90-Million for Overseas Think Tanks
Next: Obama Budget Would Keep Estate Tax at Current Levels
I think this plan to limit the amount of deductions by donors is very risky and not forward-thinking, especially in light of the financial turmoil that many donors have been hit with via their portfolios. With Obama’s plan to further limit charitable deductions on top of market losses and additional new taxes, the non-profit sector in many communities across the nation is going to be reeling even more than they already are for the next 12 months and beyond. It sure limits my abilities to do more….
Lauren Ackerman
Trustee, Napa Valley Community Foundation
— Lauren Ackerman May 11, 02:33 PM #
Lauren,
You should check the numbers before taking that position. At no time in the last 40 years when the top tax rate changed has charitable giving decreased by a significant amount. At worst it was flat from the year before.
It constantly amazes me that professionals in our field continue to lodge these complaints without first consulting the historical record.
AND, since the estate tax will remain, according to another article, and not be cancelled, all those planned giving experts can still work their magic without fear of becoming obsolete.
I realize that this particular event is different than the others, since only charitable giving will be affected. But I have confidence that those who motivate giving will continue to be just as effective as before.
— Sam Prince May 11, 02:38 PM #
Sam:
And at what time in the last forty years have we seen an economic downturn akin to what we are facing now? When have so many lost so much? I think Lauren is correct. More money for the Treasury, less for non-profits.
— James P Bowers May 11, 03:12 PM #
Of course its about more money for the Treasury and to say anything else is a spin—and that, Stan, is not amazing.
— Jennifer May 11, 04:25 PM #
The Obama Administration should actually provide greater incentives to “wealthy” people to make larger investments in non-profit organizations, especially those that deliver social services and those that are engaged in education.
— Joanna Tahar May 11, 04:50 PM #
That is it exactly, Joanna! This is about encouraging the wealthy to give more, not discourage giving. Sam has it wrong. No matter what history dictates, we need to be about encouraging philanthropy!
— Kevin Feldman May 11, 05:20 PM #
1. That’s SAM as in Green Eggs and Ham;
2. If you will look up the book – Federal tax policy and charitable giving By Charles T. Clotfelter on the internet, on page 16 at the bottom there starts a section that has a chart showing charitable giving by individuals from 1929 to 1981. If I am reading it correctly, charitable giving went from $1.067 billion in 1929 to .637 billion in 1933. But personal income went from 85.8 billion to 47.2 billion in that same period of time. As a percentage of income, charitable giving was at least 1.21% during the entire 1930’s. Starting in 1934 it increased to where it finally recovered to its 1929 level in 1940. But here’s the thing kids – those annual giving numbers were a function not of a lack of interest in giving but a huge drop in personal income.
SO, if charitable giving drops, take a long hard look at personal income before you start blaming tax rates.
Very few people will ever make a decision to give to charity because of tax rates. If their gross income drops, so does their giving. If the benefit they get from tax deductibility drops, they do NOT change their giving. That’s the inescapable conclusion of the history of charitable giving versus income tax rates over the last 80 years.
I still find it amazing that people who make their living raising money for worthy causes have so little regard for their donor’s motivations they think they will abandon a lifetime of behavior over a few measly percentage points of tax benefit. Anyone who believes that doesn’t know a thing about why people give to their favorite charity.
— Sam Prince May 11, 06:00 PM #
SAM, as in “Green Eggs and Ham.”
Sure, most donors’ motivations are because of their sincere desire to help the charity and its cause. No one disputes that. But, charitable deductions DO motivate those generous people to give even more — above and beyond their generous giving.
— Kevin Feldman May 11, 07:55 PM #
Make Obama’s plan more palatable by uncapping the $100,000 tax-free donation limit to non-profits from IRA’s for eligible seniors.
— Louise Warner May 11, 08:11 PM #
What many of us may be neglecting to see is that Mr. Obama is functioning true to his ideology. He wants his brand of government to be the major player in the philanthropic business at the expense of other organizations that do not share his world view. It is systematic strangulation of another industry where his party deems to have more influence and control. The bottom line purpose? Power. A government that is a ever present in the lives of voters has a better chance to convince voters that they deserve their vote. This new world order requires us to be strict with expenses and creative with fundraising as never before.
— Joe Escobar May 12, 07:17 AM #
I am not wealthy, yet I give 8 to 10% to my church each year. I itemize. I get a nice return from the govt each year (albeit, interest free). So, in essence, this is a tax INCREASE on the group Obama promised a tax CUT from. the $13 a month he so graciously gives me each week will not amount to the money I would get back via my charitable giving. I also work for a private school and we rely HEAVILY on donations. Spin it anyway you want, some people will not give as much as they used to, no matter how much we try to modivate them.
— Jamison May 12, 09:45 AM #
Jamison,
From what I read, the proposal is to limit the deduction to a 28% rate on people earning over $250,000. If that includes you, then you are not one of the people Obama promised a tax CUT.
— Jon May 13, 09:26 AM #