September 23, 2009
Senators Propose Charitable-Deduction Limits in Health Bill
Some Senate Finance Committee members have resurrected the idea of limiting tax breaks for charitable donations as a way to raise money to overhaul the health-care system.
In amendments proposed to the health-care bill unveiled last week by Sen. Max Baucus, the committee chairman, a handful of senators have proposed limiting to 35 percent the tax break that wealthy people can get for their itemized deductions, including gifts to charity.
That is less drastic than the 28-percent limit proposed by President Obama. But a coalition of nonprofit leaders this week sent a letter to Mr. Baucus opposing the amendments, saying they would create a disincentive for charity’s biggest donors during a “tough charitable giving environment.”
“Charitable organizations are dealing with enormous financial challenges stemming from the economic downturn,” says the September 21 letter, which was signed by representatives of 14 groups including the American Association of Museums, the Association of Fundraising Professionals, the Council on Foundations, Operation Smile, and United Jewish Communities.
Sen. Jay Rockefeller, Democrat of West Virginia, is the biggest advocate of the 35-percent limit, proposing it to pay for almost 20 amendments he offered to Mr. Baucus’s bill. But several other Democratic senators also offered it as a way to raise revenue, including Thomas Carper of Delaware, John Kerry of Massachusetts, Robert Menendez of New Jersey, and Charles Schumer of New York.
Mr. Obama has proposed limiting the tax breaks for charitable gifts — and other itemized deductions like mortgage interest and state and local taxes — to 28 percent of the dollars spent for couples earning more than $250,000 (individuals $200,000). The plan would take effect in 2011. The president has also proposed raising the highest income-tax bracket from 35 percent to 39.6 percent that year.
That means wealthy people would be paying more in taxes while getting less of a tax benefit for donating to charity.
Some in the nonprofit world are sympathetic to the president’s proposal, arguing it would create more fairness in the tax code (lower-income people get tax breaks of only 10 or 15 percent for itemized deductions) and help pay for changes that could bring down health-care costs for nonprofit employers. But it got a cool reception in Congress, especially among Republicans, and so far has not been included in any Congressional legislation.
Senator Baucus favors raising money in other ways, including an excise tax on insurance companies and insurance administrators for health plans with premiums above a certain dollar level.
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It is a sad day in America when I see all the great works that people before me have worked to hard to achieve, be threatened in such a way that our American way of life is literally going to be changed forever. All the cultural and wonderful benefits that non-profits provide are going to be gone in the age of OBAMA….How sad that we as a nation are sliding backwards. Those who have worked so hard to achieve are being punished… It is really sad….
— Barbara Long Sep 24, 03:25 PM #
Yes This will hurt Charities more than ever. It is hard enough to get donations as it is now. The current charitable deductions should be left alone. Expecially since all charitable donations require documentation now to be duducted on Income Tax Returns.
Congressional Representatives and Senators Leave the Tax Code as is on this one Please.
Tom Rodgers
T&C Services
Cusseta Georgia
Founder
http://tomrodgers723.community.officelive.com
— Tom Rodgers Sep 24, 05:34 PM #
Warren,
Saw this article in chronicle of philanthropy.
Thanks, Tammty
— Tammy Sep 30, 11:27 AM #
@Barbara: I believe your predictions are a bit apocalyptic. A 35% cap is far from devastating. I’d like to think that our donors make their gifts with a little more than tax breaks in mind.
— Brendon Steenbergen Oct 11, 01:31 AM #