Obama’s Charitable Tax Deduction Change

As I have previously discussed, Obama’s budget proposal was released. One of the changes includes a limit on the value of the charitable tax deduction. For the past several years, a version of the change in the charitable tax deduction has been proposed. The current budget proposal alters the existing 35% charitable tax deduction to 28%.

Critics remark that the proposal raises the cost of donating to charity. The proposed change is effectively a 20% increase on the charity tax. As a result, it is likely that charitable donations will decline. The Chronicle of Philanthropy estimates that the reduction in the charitable tax deduction could cost 9 billion yearly in potential donations. The new charity tax deduction decreases the tax liability of the wealthy. Stanford University’s Rob Reich advocates that the tax be limited only to donations with a “redistributional effect.” The administration states the tax is fair and the purpose is to cap the deductibility of major tax expenditures.

See Howard Husock, The Obama Budget Proposal: Tax Increase on Charity, Forbes, Apr. 10, 2013.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.