I doubt this will go through the Congress intact but the tax package the President put forward as part of his proposed budget includes a great big left hook to the body for charities. Tax deductions to registered nonprofit organizations would be limited to no more than 28% of any single deduction. which would have the effect of increasing the “cost” of the contribution by about 20%.
That means the value of some of the most popular deductions — such as mortgage interest and charitable contributions — would be reduced for high-income filers.
It would be silly to suggest that charitable contributions would dry up as a result of this because people simply don’t donate to nonprofits for tax purposes alone, they are motivated by non-financial reasons, namely helping people.
The Nolan household is four square in the sights of President Obama’s tax aspirations and I am really concerned about anything that takes away a tax advantage I enjoy for providing support to community organizations that do good work for people that need help. Each year we contribute about 12-15% of our after tax income to a handful of organizations and if this proposal were to be enacted the net result would absolutely be that our giving would decline as a result of us donating more to another organization – the Federal government.
We can’t give any more than we already do so if the government wants a bigger slice, well someone else’s slice is going to get smaller. This is what happens in the real world unlike, say, Congress or the California legislature where money is spent with total disregard for how much they can afford to spend.
The super rich won’t care about this but I, like a great many other people, will because how much I pay in taxes is material and like everything else we have to budget our tax bill. With charitable donations already down about 20% across the board because of the general economy, this proposal and the impact it will have on organizations that are already hurting will be devastating.