Obama’s Budget Proposal Likely to Have Negative Effect on Charities

As I have previously discussed, President Obama’s budgetproposal could have a huge impact on charitable donations.

For every donation to a nonprofit organization, taxpayers inthe highest tax bracket currently receive a 39.6 percent tax deduction.  Obama proposes to cap the tax deduction fordonations at 28 percent for all tax brackets. Along with increased income taxes, capital gains taxes, and Medicaresurcharges, this cap on tax deductions could provide an additional disincentiveto donate.  Charities also worry aboutanother budget proposal known as the Buffett Rule that would require those withan annual income over $1 million to pay a minimum tax of 30 percent.

This proposal comes during a period of stagnant revenue forthe charitable sector.  One study shows“that the top 2.2 percent of taxpayers were responsible for 27 percent of allcharitable giving.”  Providingdisincentives for the top tax brackets to donate may have a devastating effecton the charitable sector and the needy who benefit from it. 

See Colleen O’Dea,Charities Fear Obama Budget Will HurtDonations, Private Wealth, Apr. 19, 2013