We recently read an article in the Wall Street Journal regarding nonprofits campaigning against a provision in President Obama’s jobs bill that would limit itemized deductions, including charitable contributions, for individuals with an annual income of $200,000 or more. The federal proposal, which would cap itemized deductions at 28% from the current 35%, provoked an interesting conversation among our team about the impact this would have on giving nationally.
Considering the recent abundance of government cutbacks on nonprofit funding, particularly to human service groups, this provision seems to pose a bit of a “double whammy.” Not only will these nonprofits be receiving less government funding, but simultaneously a change in tax code that would mean people will likely be giving less to these types of organizations. Need we not forget that 2/3 of individual gifts in this country are coming from the high net-worth individuals who will actually be impacted by this tax change. This is particularly daunting seeing as many basic needs organizations are experiencing an increase in demand for their services due to the economic downturn.
Some people believe that if passed this proposal will not have much of an impact on giving and that if we are going to cut the deficit in this country, then this is one way to do it. Our question is not whether it’s a good or a bad thing, but whether this is truly the right time to be making such a change? We’d like to hear from you though. If passed, how do you think this new tax code will effect giving in this country?