The nonprofit world has been a buzz since President Obama unveiled his proposed budget earlier this month, and much of the buzz has little to do with the federal funding for various programs going forward. A proposal for a cap on itemized deductions for wealthy Americans has monopolized the conversation, which (if passed) could impact the tax incentives people receive for charitable donations.As it is currently written, families with incomes over $250,000 (or individuals who make more than $200,000) would have their tax rate for itemized deductions capped at 28 percent, down from the current 33 or 35 percent. This new cap is proposed to start for the 2011 tax year.
What the impact of this cap would be on charitable giving is a point of discussion, with estimates varying significantly. For example, the Center on Budget and Policy Priorities estimates that the proposed cap would mean a 1.9% decline in charitable giving. The Chronicle of Philanthropy cited a study with a different result:
Using 2006 tax data, the most recent available, Indiana University’s Center on Philanthropy has estimated that giving by high-income households would have been 4.8 percent less if President Obama’s proposed limits on charitable deductions, and increases in taxes owed by the wealthiest Americans were in effect then.
Anecdotally, as National Public Radio reported recently, some donors are claiming that cap or no cap, they will give to their chosen charities regardless of the tax incentive.
We want to hear from you. What are your thoughts on the proposed budget cap?
