Posted on March 30, 2009

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President's Proposal to Limit Tax Deductions for Wealthiest Donors Spurs Debate

Even as President Obama defends his proposal to cut the tax deduction wealthy Americans can claim for their charitable giving, two independent analyses have concluded the proposal could reduce donations to the already reeling nonprofit sector by as much as $3.87 billion, the Washington Post reports.

In a new analysis, the Center on Budget and Policy Priorities in Washington, D.C., suggests that total charitable giving would decline by about 1.3 percent if the administration's proposal became law, while the Center on Philanthropy at Indiana University calculates that overall giving would fall by 2.1 percent, with the highest-income households reducing their giving by 4.8 percent, or $3.87 billion. "Charities and the public need to understand that in the current economic environment, which is creating difficulty for some nonprofits and their constituents already, this public policy change is likely to have an additional negative effect," said Center on Philanthropy interim executive director Patrick M. Rooney.

Currently, the charitable giving deduction for those who earn more than $250,000 is 35 percent. Under the administration's proposal, the deduction would be lowered to 28 percent — the Reagan-era rate — and the extra revenue generated would be used to finance healthcare reform. "Generally, what keeps people giving is economic growth, increasing incomes, and increasing prosperity, and in totality that's what this budget would do," said Kenneth Baer, a spokesman for the Office of Management and Budget. "This change is going to fund healthcare reform, and constraining those costs is the single biggest thing we can do to put our country on a sustainable fiscal path and get this country going."

Others, however, are less enthusiastic about the proposal. Independent Sector president Diana Aviv said any drop in charitable giving caused by the proposal, no matter how small, would be a blow to the sector. "With all other means of income down, the idea that there will be another potential cut to the income of those nonprofit organizations feels catastrophic," she said. "It is utterly unacceptable."

Rucker, Philip. “Obama Defends Push to Cut Tax Deductions for Charitable Gifts.” Washington Post 3/26/09.

Primary Subject: Philanthropy and Voluntarism
Secondary Subject(s): Public Affairs
Location(s): National

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