PGDC Poll: Will the Obama administration's plan to limit itemized deductions increase or decrease charitable gifts?

PGDC Poll: Will the Obama administration's plan to limit itemized deductions increase or decrease charitable gifts?

News story posted in Demographics on 6 March 2009| 28 comments
audience: National Publication | last updated: 18 May 2011
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Seems to me this would not

Seems to me this would not even be an issue under discussion, here or in Washington, were it not for the massive economic downturn, unseen for the last 70 years. Fortunately, we are beginning to bounce back, but that does not remove from the minds of citizens or politicians the desire to balance the budget. Forget all the media hype about communism/fascism/socialism etc. This is about finding sources of revenue and attempting to balance budgets and concepts of fairness. This site is geared toward money managers/tax experts, not philanthropy, and anyone who understands the latter knows that tax benefits, or extra burdens as proposed currently, provide scant influence on the majority of donors at the extremely high levels of gifting contemplated in the proposals. You can use the conversation to support your favored position (whether an assault on basic american values or the polar opposite), but that's just all about you, not the conversation. The real world, on the ground issues among students of philanthropy are much simpler and less characterised by "chicken little" alarmism.

Flat Taxes, No Deductions

Interesting article from the Heritage Foundation on a Flat Tax and Charitable Giving: http://www.heritage.org/Research/Reports/1996/12/BG1093nbsp-How-a-Flat-T... Quotes: 1) The federal tax code should be used to raise money, not influence behavior. 2) Charitable giving has remained relatively constant despite wide fluctuations in tax policy: http://www.heritage.org/static/reportimages/ED178EEC6875E4B32204C1A5E06B... 3) A full 91.7 percent of religious congregations in America sponsor human service/welfare programs through the donations they receive. 4) Non-itemizers account for roughly 64% of all donors.

Wrong Policy

This is wrong thinking policy. The thought is that high-income earners get more favorable treatment on a charitable deduction. But they do pay more in taxes and, in general, account for the largest portion of charitable giving - and not because of the tax break. The right policy would be to make the charitable deduction above the line (not on Schedule A) so that everybody gets the tax benefit. Under this policy we would only expect charitable giving to increase. Calvin Guyer, CFP(R)

Tax deduct for Charitable giving

Thank you, Mr. Chute, for speaking thoughtfully rather than emotionally on this subject. I agree with most of what you said. Our income tax code needs a bigger overhaul than what is being talked about. I would be in favor of a complete overhaul to get rid of most deductions, including the corporate welfare that is imbedded in the Code, if we can reduce the tax rate substantially. I do not think decreasing the deductability of charitable gifts as proposed will substantially reduce giving. I believe charitable gifts are made because we believe in the purpose of the charity not because we want to spend $1 to get a tax benefit of 39 cents or 33 cents or 28 cents.

There can be so many

There can be so many arguments in this statement that it won't be having any end. But as Obama's speeches and his views are concerned, in my opinion there ought to be some increase in the charitable gifts to help the needy. Regards,

While this article is on the

While this article is on the effect of reducing the tax deduction, I think something President Obama said during that news conference is absolutely right. Charitable contributions are more effected by the economy than the amount of charitable contributions deductions. I think most of you would agree that during periods where the economy is strong people give more to charity than when the economy is not strong, in particular large gifts. In my meetings with my clients in the past, charitable planning was always brought up and discussed. Today many of those clients are focusing our dicussions on whether they still have enough for their retirement. To the extent that President Obama can get the economy growing again will have a much greater positive impact on charitable giving than the reduction of the tax deduction will have a negative impact.

Proposed limitation in charitable deduction

The income tax charitable deduction that Section 170 allows to individuals is a way that government encourages giving. The greater the subsidy, the greater the encouragement. But there is nothing in history to suggest that government must or ought to subsidize charitable giving. From one point of view, government ought not allow a deduction for charitable gifts made by citizens. On the other hand, government ought to take actions to encourage citizens to do things that the government believes are beneficial to the country. This certainly is not governmental control (I still decide to whom I make my gifts and the amounts of my gifts (although the government subsidy may cause me to increase what I otherwise would have given)). I suspect that the proposed change, if enacted, will have little impact on the amount of charitable giving. The general economy as a whole will have a much bigger impact. Respectfully submitted, Alan S Acker, Esq.

Reduction of Charitable Deduction at the Top

Some above have suggested abolishing the charitable deduction all together. That might not be a bad idea. That could really test people's charitable intent and the case for support of the organizations instead of some kind of quid pro quo.

Expenditure policy

I think the question was "will the policy increase or decrease charitable gifts." I guess the Obama proposal will actually test the mantra that the wealthy don't give because of the tax considerations. Perhaps this is a good way to inject some evidence based theory into a soft science. This government has always kept two budgets--the real and an expenditure budget. The latter is based on what the government has given up in defference to provisions in the tax code (i.e. as if all income was taxed and their were not deductions). Application of this theory to charitable giving for the top 2 or 3 percent of Americans will help us find out the true charitable intent of the wealthy. We already know that the personal giving percentage of income for those living in the five poorest states exceeds the personal giving percentage of income for those living in the five highest income states. Don't think of it as socialism--think of it as research.

8 Years of Right Wing Hyperbole?

60 days of left wing social engineering trumps hyperbole every time!

Read this before commenting on Obama's plans

Before all of you post opinions (which should be based on sound analysis of facts) on the potential effect of Obama's tax hike (even those via deduction reduction) please inform yourself about tax history for the last 5,000 years and how raising and lowering taxes by many means and collection methods has actually affected civilizations. Read Charles Adams first book, Fight, Flight or Fraud, 1982, or his second book, For Good or Evil, the Impact of Taxes on the Course of Civilization (1992). They are both well worth the reading and will open your eyes very wide about what is currently going on in this country with regard to taxes. Enjoy your reading, if you are truly conscientious enough to learn the facts. They are great books. Lynda S. Moerschbaecher

Read this before commenting on Obama's plans

I will second the idea of reading Charles Adams work. I recently read For Good and Evil, the Impact of Taxes on the Course of Civilization. I will point out a little but important typo, Lynda. It is not "For Good or Evil" but "For Good AND Evil". In the context of the book that is significant. Taxes are both good and evil, necessary and totally destructive depending on their level and their implementation. Given his background and training as a community organizer, I am personally very suspicious of where Mr. Obama would like to take this country. And I for one do not want to go there. He has followed with amazing accuracy and detail the course laid out by Saul Alinsky, let that tell you what it will. Charles L Stanley CFP ChFC AIF

Charity is in the heart

It is strange that Mr. Stanley would criticize someone who devoted his talents after college to helping the poor people of Chicago get out of the hopeless plight they were in through no fault of their own. I call that real charity and have no problem with a leader who subscribes to that kind of philosophy.

Redistribution of wealth is not charity

Obama' work with Chicago's needy was to organize and get them to the polls to vote. He was not acting in any charitable sense whatsoever. Those "poor people of Chicago" are only better off to the extent that their next handout may be a bit bigger as a result of increasing taxes on the producers and employers of our society. If the community organizer really wanted to help those people who need it, he would help them get a vocation and help them understand that they have the power and the ability through their own hard work to make it out of "poverty". Continued reliance on the government for a handout is not charity.

Eliminate the tax code instead.

Can we not see what is happening to us all as a result of the current practice of taxing our incomes then offering deductions from that tax for certain expenditures. Class envy is what I see. Do away with the income tax all together and replace it with a consumer tax. Some calculate that a 17% to 22% consumer tax would fund the entire governments budget with a surplus. Everyone would have a stake in our government, rich and poor and all in between. Our take-home paychecks would be about 17% to 25% larger. Dump the entire Department of the IRS and April 15th would just be another day on the calendar. Your charitable giving would be entirely up to you. Government would shrink and the economy would grow. The trillions of dollars in off-shore accounts would flood back into this country. Our colleges would burst at the seams with all those IRS employees getting re-trained for new careers, not to mention the accountants that would not be needed to prepare our tax returns. Our products would be the most competitive on the globe since all things currently manufactured have a built in hidden tax in their price. This is the tax the manufacturer has to pay on their profits. No tax on income -- lower prices to the consumer through competition.

You must be a high earner...

if you expect to see a 17 % to 25 % larger take-home paycheck if the income tax were replaced with a federal consumer tax (sales tax / value-added tax). Income taxes are progressive (Oregon's state income tax notwithstanding) whereas consumer taxes are regressive. Your suggestion would result in low-income people paying a higher percentage of their earned income in taxes, thereby subsidizing you tax burden as a high earner -- and affording you the opportunity for a larger post-tax paycheck.

Eliminate the charitable deduction

I am opposed to any income tax deductions for gifts to charity. Why should the taxpayers who don't attend the opera have to subsidize the opera for those who do attend? Why should taxpayers who are deists or atheists have to subsidize churches espousing religions in which they do not believe. I would hope that those who enjoy the music and the possibility of salvation would support the opera and the church they attend without the necessity of a tax deduction or of forcing other taxpayers to subsidize things they might not enjoy or benefit from.

Faulty reasoning

Why should people who don't have children have to pay taxes to support public schools? Why should people whose houses have never caught fire pay taxes to support their fire departments? We pay taxes for the common good.

Eliminate forced philanthropy

Charitable contributions or forced philanthropy(taxes)? Using your argument, I should be able to decide how much tax I pay based on my personal beliefs in government handouts. How much of my tax dollars goes to support causes I as a free American citizen do not believe in. I believe in a free society where Americans help Americans without government dictating my right to make that choice. Scale back handouts and we can get back to where we were over a hundred years ago, work for what you need, spend less on frivolous wants, save more and spend less. But since that is pie in the sky thinking today, we still need charities to better the local communities. Even though I agree that the charitable deduction is not the main reason people give, it does allow them to lessen the impact of what their tax liability will be and the forced philanthropy that is attched to it. No sir, I don't want you supporting charities that you don't believe in, but I also don't want Obama and others, limiting many who do, by penalizing them with lower deductions and forcing them to support his and other government employees personal picks. Just think where taxes would be today if government took over all of the charitable work that millions of Americans support, yes even the wealthy.

Really?

Gosh, I never before realized how little control I had over my life as a result of government. Heck, if only those roads weren't in my way (not to mention those pesky stop signs and stop lights!), I could drive anywhere I want. Now I realize that by taking those gas taxes from me and building roads with it, the government is robbing me of my freedom! Okay, all fun aside, I do find it difficult to understand the idea that all those assets are mine and mine alone when my ability to accumulate them depends so much on the entire context and infrastructure of our society and economy. There is no true private free market that allows us to accumulate wealth entirely on our own. We all rely on shared systems that are shaped by a common government, and we all need to help fund it. We can differ on which elements should be more or less government funded/regulated, and I think there are good points for why some things should handled more in one sector than the other. But the sweeping statements that our new leadership is stealing peoples' assets and creating a socialist system are simply gross exaggerations. And arguably we would not be in this pickle if some key elements of the economy had benefitted from a little more rather than a little less regulation (credit default swaps as just one example). The decrease or increase of a tax incentive for giving may influence people's choices, to be sure, but the existence of the incentive is not in and of itself an entitlement. If you really want government out of your life, wouldn't you prefer for all of the charitable tax incentives to be removed so that you are entirely free to make your own choices without undue influence? An extreme statement, but no more than the thought that someone should overpay their taxes to prove how much they like them. Such silliness, really. I'm in the camp that feels there may be some impact, but that it will mostly be felt around the margins. Tax implications are a component of my discussions with donors, but they are not the leading issues. Yes, they want to be tax efficient to the degree possible, but the falling IRS disount rate has been a much bigger factor in these calculations than the proposal to cap the deductibility of gifts. Donors I'm working with have already decided to make the gift for other charitable and/or financial reasons, and then they are just looking for ways to be smart to the degree possible given the conditions of the moment. For example, just last week a donor told me that he wasn't concerned about an annuity having a lower deductibility in March than February--other issues were more important in his mind. The political hyperbole doesn't really advance serious discussion! I'd like to hear from people about real situations rather than about their underlying political views. Richard M. Chute

Really,

Very Well Said!

Eight years of right-wing hyperbole is enough

Bravo, Richard M. Chute! Thank you!

Decreased charitable deduction will decrease gifts

What is there to debate? The question is absurd. Of course donors think about the after-tax cost of their gifts. I would like to hear from the planned giving adviser who has never been asked to illustrate the value of the tax deduction for the client. If anyone really believes that donors are indifferent to the value of the charitable dedcution, then they should be asking to eliminate the deduction altogether. Which, of course, would be disastrous for the nonprofit sector.

Not Really a Disaster

Eliminating the tax deduction would almost certainly reduct gift revenue to the nonprofit sector. But I'd be willing to have that happen and put the emphasis back on charitable intent and the case for support instead of emphasizing the tax benefits a donor gets from making a gift.

Charitable Deduction Reduction

While the full effect of such a measure will not be fully understood until it is adopted

Charitable Deduction - and beyond

Keith, I agree with your assessment, especially as expressed in point #1. This is true especially for small business owners - if they are not intentionally including philanthropy in retirement, business succession, and estate plans they are effectively saying that the government reflects their values accurately and that they approve of the government's use of their legacy assets. The choice is made by default. However, through thoughtful consideration, they can fund the people, causes and institutions that they cherish and manifest their values. Reducing the Charitable Deduction would be only the first step toward redirecting privately created abundance that is currently channeled to non-government entities that are a valuable asset in the society. The freedom of each person to make his/her "social investment" choices should be defended and encouraged, no matter how insignificant the impact appears on the surface.

proposed cut into tax advantaged charitable giving

while there is still a long way to go from the administration's proposed budget to adoption, even if the proposed cut into the tax advantages of charitable giving were to be adopted - adding $12 to the cost for each $100 of charitable giving for itemizers earning $250,000 and above - it will provide yet another opportunity to demonstrate that tax considerations are not a top factor in the charitable gift planning decisions of affluent and high net worth donors. besides - just a thought here - as citizens and taxpayers, there are far greater issues with much more consequential potential outcomes that this new administration has set in motion than the charitable contribution deduction matter.

Political Pap

Dear T Sudol: Thanks for trying to lead us into more mindless support of the greatest assault on American values - including personal charity - since FDR! This proposal will literally move choice of supporting one's causes with private contributions, to total government control, and will kill effectively charitable giving. Dream on, comrade!

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