Nonprofits oppose change in charitable deductions

February 19, 2012

For the fourth year in a row, President Obama is proposing lower tax
deductions for the wealthy on donations to churches and other nonprofit
organizations. And for the fourth year in a row, nonprofit groups say
the change would lead to a dramatic drop in charitable giving.

Under
the Obama proposal, the tax break for charitable donations would fall
from 35 percent to 28 percent for the top 2 percent of taxpayers, those
earning more than $250,000.

In real terms, that would mean a
wealthy taxpayer who donates $10,000 to a charity would be able to claim
only a $2,800 deduction on his taxes, rather than the current $3,500.

The
reduction, included in Obama's 2013 budget proposal, rankled the Union
of Orthodox Jewish Congregations of America. "We were hoping this would
not come up again this year. We asked that they not renew it, but
unfortunately the request was not taken," said Nathan Diament, the
group's Washington director. "It's a real concern."

When it
analyzed a similar proposal in Obama's 2012 budget, the Center on
Philanthropy at Indiana University said it would boost federal revenue
by billions of dollars and have a "modest negative effect" on charitable
giving.

Obama has argued in the past that it is not fair that the
wealthy receive a larger tax break for their donations to charity when a
middle-class taxpayer can only claim a deduction of 15 percent. He has
also said charities would "do just fine" under the change.

On
February 16, the White House said the change wouldn't affect the 80
percent of overall contributions that come from individuals and
foundations and is "unlikely to have a substantial impact on donations."

The
last time the charitable deduction rules were changed, in 2002-2003
under President George W. Bush, the top rate was lowered from 38.6
percent to 35 percent.

"At that time, the level of individual
charitable giving rose, suggesting that other factors are much more
important to the process," Jonathan Greenblatt, director of the White
House's Office of Social Innovation, wrote on the White House blog.

But
charitable groups insist that it remains a bad idea. "At a time when
charities are still struggling, this proposal is a bad idea," said Rick
Dunham, president and CEO of Texas-based Dun­ham+Company, an
international consulting firm for charitable organizations.

The
proposal was called "very counterproductive" by Galen Carey, the
Washington director for the National Association of Evangelicals. "We
fully support the need to reduce the budget deficit," Carey said, "but
it doesn't make any sense why this keeps coming up."

On the basis
of 2009 data, 74 percent of Americans' charitable donations went to
churches and religious organizations, said Sylvia Ronsvalle, executive
vice president of the Illinois-based Empty Tomb re­search organization,
which tracks charitable giving.  —RNS