Charitable Deductions

As we get closer to tax day, it has been interesting to see the reaction to the plan floated by President Obama to reduce the charitable deductions for wealthy Americans. He has wants Congress to limit to 28 percent the tax saving from contributions for taxpayers who itemize their deductions. Many believe that the combination of higher tax rates and a 28 percent cap on the value of deductions for charitable contributions will diminish donations to churches and charities.

I am surprised at the amount of misinformation concerning this proposed change. First, it only applies to people in the highest tax bracket. Some of my listeners assumed it applied to every taxpayer. Second, it won’t take place immediately. Third, it will merely reduce the charitable deduction not eliminate it. A donor in the highest tax bracket will still receive a $280 charitable deduction instead of $396 for a donation of $1000.

But even so, there are many in the nonprofit community who are concerned about the impact this change might have. While these wealthy Americans only comprise 3 percent of the tax returns, they account for 44 percent of all charitable deductions. It is estimated that President Obama’s plan will cost them $10 billion in extra taxes they allocated to charitable deductions.

Of course we can hope that people will still give to churches and charities even if they don’t get as much of a tax break. But that might be asking a great deal from those who already provide almost half of the charitable giving in America. Perhaps people will still give to their churches, but will they continue to give as generously to hospitals, universities, homeless shelters, and soup kitchens?

Although the plan is supposed to provide funds for various government programs proposed by President Obama, Dick Morris believes the plan is not about saving money but controlling it. The plan effectively transfers billions from private philanthropy to government spending. The plan “empowers the public sector at the expense of the voluntary one.”

The voluntary sector is funded by charitable contributions and has been the backbone of American compassion. Congress should consider the impact this plan will have on society. I’m Kerby Anderson, and that’s my point of view.