Posted on October 11, 2012
Romney's Tax Proposals Could Affect Giving
Romeny's Tax Proposals Could Affect Giving
Republican presidential nominee Mitt Romney has floated a number of changes to the tax code that experts say would weaken the incentives for charitable giving, Businessweek reports.
Romney's proposals — all of which could make it more expensive to give — include repeal of the estate tax and capping itemized deductions for the nation's top earners while lowering their marginal rate. According to Businessweek, both presidential candidates have offered tax reform proposals that would reduce the incentives for charitable giving, although the Obama administration's plan would have less of an impact than Romney's.
Obama's estate tax proposal includes lowering the individual exemption from $5.2 million to $3.5 million and raising the top rate to 45 percent — both of which were in effect as recently as 2009. In addition, under the Obama plan the marginal tax rate for top earners would rise to 39.6 percent, while itemized deductions would be capped at 28 percent.
"A huge portion of charitable giving is purely altruistically motivated and it's also hugely motivated by wealth," said Williams College economics professor Jon Bakija. "You change the tax incentive, it changes how much people give."
Research has shown that charitable contributions fall by a full percentage point for every percentage-point increase in the cost of giving. In the meantime, many donors, uncertain about future tax policy, are rushing to make gifts by the end of the year. "[Donors] don't know what's going to happen," said Amy Danforth, vice president of marketing for Fidelity Charitable. "But they do know what the tax laws are this year."