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Tuesday, April 9, 2013
Charity Tax Deductions Up Again For Consideration...questionable effects
by Gary Snyder
According to the Chronicle of Philanthropy, President Obama is expected to renew his call to limit the charitable tax deduction when he releases his 2014 budget plan—a proposal that nonprofits have repeatedly helped defeat.
A coalition of charities helped head off the president’s most recent attempt when the White House and Congress reached a budget deal on January 2. In fact, that agreement actually increased the value of itemized deductions by raising the top marginal income tax rate to 39.6 percent from 35 percent. Because the charitable deduction is tied to a person’s tax rate, donors in the highest bracket are now able to get a tax savings of 39.6 cents for every dollar donated to charity.
That means a $1,000 contribution would cost a taxpayer $604.
The 28-percent proposal would limit the value of the deduction to $280 on that same gift, increasing the cost of the donation to $720, or by 19.2 percent.
The White House estimates that the new limit would generate $321-billion in additional revenue through 2021, according to the Tax Policy Center.
Obama administration officials have said that the change would affect only high-income taxpayers—singles with incomes in excess of $200,000 and married couples with incomes above $250,000. Taxpayers with incomes below those levels who do not itemize deductions would not be affected—“the vast majority of donors,” Jacob Lew, the new Treasury secretary, said.
Some nonprofit advocates say the proposal could reduce donations by as much as $9-billion annually.
Others suggest that that a new tax provision on deductions will not hurt charitable giving.