Obama tax proposal could hinder giving, charities fear

In his White House press conference last night, President Obama defended his proposal to reduce the tax deduction for philanthropic gifts, stating that the measure would not deter donors from giving. But some philanthropy experts disagree. The Council on Foundations, an Arlington, Va.-based member organization, has urged lawmakers to maintain the current law. “Our sense is that this proposal could possibly hinder charitable giving,” said Monica Wroblewski, a spokeswoman for the Council on Foundations. “In these tough economic times, it is not the time to implement any kind of policy that hinders the growth of philanthropy.” The Obama proposal would cap itemized deductions at a tax rate of 28%, down from 35%. Under the current law, if a donor is in the 35% tax bracket and gives $100,000 to charity, they can deduct the entire gift and reduce their income taxes by $35,000. Under the Obama proposal, they can only deduct their gift at the 28% rate, reducing their taxes by $28,000. Still, the tax deduction proposal may not be the main problem. “I’m skeptical that charitable gifts are driven by that particular tax rate,” said William Raabe, author and tax professor at Ohio State University’s Fisher College of Business in Columbus. “But a general tax increase on the upper-income end will hurt charities because it will mean less discretionary money.” “Donors are motivated by how much money they have hanging around to give,” he said.