Obama budget cuts some tax breaks for non-profit giving


From Howard Friedman at “Religion Clause

President Obama yesterday released his budget proposals in a 140-page document titled A New Era of Responsibility: Renewing America’s Promise. One provision is controversial among non-profit groups, including a number of religious organizations. For families with incomes over $250,000, itemized tax deductions (including charitable deductions) would be at only a 28% tax rate instead of 35%. The additional revenues generated would help expand health insurance coverage. Today’s New York Times says that “wealthy donors and the nonprofit groups they support were in an uproar” over the proposal. However it goes on to report that surveys indicate few wealthy donors are likely to reduce their giving as a result of the change and many high-income donors are already capped at 28% because of the alternative minimum tax. A statement opposing Obama’s plan issued by United Jewish Communities however argues that “any reduction in the tax benefits available for charitable giving will have a significant negative impact on giving.”

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Chuck Blanchard
Chuck Blanchard

I am in the 35% tax bracket. Under current law, when I donate $1000 to Trinity Cathedral (or my other favorite charities), the U.S. Government is paying $350 of my donation. Thanks, Uncle Sam!

For folks making less money, however--like those in the 28% and 15% tax bracket, the government is only paying $280 and $150 of their donations. And this is true of all of my deductions. Uncle Sam is paying a larger share of my mortgage interest payments and my state income taxes than folks who make less money than I do.

This doesn't make sense to me at all. Why should higher income folks get MORE of a subsidy of charity and mortgage interest than middle and lower income taxpayers? Or put even more bluntly, why do we think that the rich need more of a subsidy than the poor in making a charitable donation or paying for a mortgage.

All that the Obama budget does is to inject some sense into current tax law. Matt Miller does a great job explaining this part of the Obama budget here.

Chuck Blanchard

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