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Charities Push Back on Plan
to Limit Tax Deductions
or the second time in as many years, the Obama administration is proposing to reduce the tax deduction that wealthy taxpayers receive for charitable contributions. And once again, some charities--including several religious groups--are pushing back against the plan.
A number of non-profit groups have criticized or raised questions about the proposal, which was included in the president's 2011 budget released February 1. They believe such a move would mean a certain decline in charitable donations, which would be especially harmful in an already turbulent economy.
A similar proposal last year floundered on Capitol Hill, but non-profit groups say they are taking no chances in making their
feelings known about its return.
The proposal would lower the tax deduction that married couples earning more than $250,000, and individuals making more than $200,000, can claim for charitable contributions from 35 percent to 28 percent, which is what the deduction was during much of the 1980s.
That would mean that a wealthy taxpayer who donates $10,000 to a charity would be able to only claim a $2,800 deduction on his taxes, rather than a $3,500 deduction.
Obama last year defended the reduction by saying he didn't think it was fair for the wealthy to get a much larger tax break for charitable deductions than the middle class, which can claim a 15 percent deduction. He also doubted the proposal would have much of an impact on charitable contributions. "If it's really a charitable contribution, I'm assuming that that shouldn't be the determining factor as to whether you're giving that $100 to the homeless shelter down the street," he said in March 2009.
The White House hopes the smaller charitable deduction, along with cuts in the level of other itemized deductions for wealthy taxpayers, will raise close to $300 billion in tax revenues over the next decade.
The one significant difference in the proposal is that last year, the proposed revenues from the change were targeted to pay for health care reform; in the 2011 budget, the additional revenue would go towarddeficit reduction. "We definitely support the idea of deficit reduction, but we don't think this is the way to go about it," said Galen Carey, director of government affairs for the National Association of Evangelicals.
Carey said even if the economy was stronger, such a change would still be a bad idea because of its effect on donations to the non-profit sector.
Nathan Diament, public policy director for the Union of Orthodox Jewish Congregations of America, was one of the first to criticize the budget proposal.
"The White House believes this is a matter of tax fairness," he said, but argued that non-profits seeking to raise significant dollars would be "adversely affected by this proposal."
John Ashmen, president of the Association of Gospel Rescue Missions, said the change sends the wrong message to donors as well as non-profit groups, telling "people who see needs in their own neighborhoods (that) we're not going to give you the full benefit you've realized in the past."
Ashmen said he detected fairly unanimous opposition to the change among non-profits and religious groups in Colorado Springs, Colorado, where his organization is based.
Also expressing disappointment in the proposal was the Jewish Federations of North America. William Daroff, vice president of public policy and director of the group's Washington office, said the proposal showed a lack of understanding of the vital role charities are playing in providing a safety net during tough economic times.