On the heels of Martin Feldstein’s op-ed yesterday saying that President Obama’s proposed reduction in the charitable deduction would hurt non-profits, the Washington Post identifies two new studies today that found charities could lose billions from the measure:
President Obama defends his proposal to cut the tax deductions that wealthy Americans can claim for their charitable donations by arguing that the shift would not have an adverse effect on giving, but two independent analyses concluded that the proposal could result in a drop of as much as $3.87 billion for the already reeling nonprofit sector.
In his prime-time news conference Tuesday, Obama pushed back against bipartisan criticism of his plan, which is included in his budget blueprint, by saying that "there’s very little evidence that this has a significant impact on charitable giving."
But a report from the Center on Budget and Policy Priorities said total charitable contributions would decline by about 1.3 percent, while the Center on Philanthropy at Indiana University calculated that overall giving would drop by 2.1 percent. The highest-income households would decrease their giving by 4.8 percent, or $3.87 billion, the latter group found.
"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 Patrick M. Rooney, the philanthropy center’s interim executive director.
Under Obama’s proposal, the tax deduction for those with incomes over $250,000 — which is now 35 cents for each dollar donated — would be limited to 28 percent. That would return the rate to where it was during President Ronald Reagan’s administration.
The paper also notes there has been bipartisan questioning of the proposal:
In Congress, members of both parties have spoken out against Obama’s proposal since it was introduced last month. House Majority Leader Steny H. Hoyer (D-Md.), in an interview on MSNBC, said: "That’s going to be controversial. And, obviously, charitable institutions will be — have great concern. Clearly, one of their greatest concerns will be very, very large-income donors who make very substantial contributions to very worthwhile enterprises."
House Minority Leader John A. Boehner (R-Ohio) said in a statement yesterday that limiting charitable tax deductions to 28 percent "is absolutely the wrong thing to do. The administration should reverse course on this reckless policy that will hurt too many universities, churches and other charitable organizations."