Obama’s tax proposal will hurt charitable donations to the poor

Official_portrait_of_Barack_ObamaBy Dwight L. Schwab, Jr.

President Barack Obama has taken to trolling in dark waters over his proposal Monday to limit the value of the charitable tax deduction for high-income contributors. It would mean a move that would actually cut charitable giving by nearly $10 billion and in the end hurt those it is intended to aid.

Obama had earlier asked Congress to limit the value of a deduction for a charitable gift to 28 percent. The top tax rate this year is 39.6 percent for those with taxable income of at least $464,850.

The Obama administration’s reasoning is the proposal would “make the tax code more equitable” because the value of the tax deduction is proportional to one’s tax bracket “so it is less valuable to those in the lower brackets,” according to a White House spokesman.

In an article by Howard Husock for Forbes.com, he sees the proposed limit as having a negative and possibly unforeseen effect. Husock is the vice president for policy research at the Manhattan Institute.

He also cited research showing that in one recent year, just 2.6 percent of American households had an adjusted gross income of more than $200,000. These same households account for 25.1 percent of all income and 29.5 percent of the total value of charitable donations made by all households.

The new rules amount to “a tax increase on such giving would, not surprisingly, reduce charity overall,” Husock states. He goes on to say that economist Arthur Brooks, head of the American Enterprise Institute, has estimated that the decline would be around $9.4 billion, out of annual donations of some $220 billion.

The proposal would have the opposite effect of what it intends. The proposed change in the tax code would actually impact lower-income Americans as well as the wealthy contributors in a big way. Approximately 80 percent of high-income donors make donations to organizations that provide for the “basic needs” of the poor in education, healthcare, the economy, and other areas. The proposal would have a devastating effect on those contributions.

Share the joy
  •  
  •  
  •  
  •  
  •  
  •  
  •  
  •  
  •  
  •  
  •  
  •  
  •  
%d bloggers like this: