By Rep Patrick Tiberi
Charities predict they will lose $7 billion a year -- at a time when the needy are needier -- if President Barack Obama persists in reducing the tax break for charitable donations. He wants to lower the rate to 28 percent from 35 percent for families earning more than $250,000 a year.
The charitable deduction has been in place nearly a century now, since the Revenue Act of 1917, and has vastly improved life in this nation. It has fostered a strong tradition of giving, which has supported education, the arts, services to the poor, medical research and other programs that enrich communities and benefit all.
For each $1,000 donated by a person in the highest tax bracket, the government gives up $350 in tax revenue. But the local community benefits from the full $1,000 gift, an impressive 3-to-1 ratio of private-public dollars. In 2008, the 2 percent of taxpayers in the top bracket made a third of all charitable donations.
Obama has tried several times to limit the amount high-earners can deduct for their charitable contributions and to use the revenues for one idea or another. His most-recent proposals were to use the money for his $447 billion jobs plan or to plug the nation's budget hole.
The Senate pulled the controversial cap from Obama's jobs bill before it unraveled altogether earlier this month. But the cap remains among the president's formal recommendations to the joint congressional supercommittee that is searching for $1.5 trillion in budget cuts.
Charities see the reduction as a threat. Even if the supercommittee disregards the president's proposal, Obama, given his past support for using the cap as a revenue-raiser, likely will reincarnate it to fund something else.
Tax rates ought to be fair, but reducing the amount of money going to charity hardly seems like the first place to act.
Independent Sector, a Washington-based coalition of charities and foundations, estimates that reducing the tax deduction would cause charitable giving to drop between 25 percent and 36 percent a year.
"Without this income," the organization says in a statement on its website, "nonprofit organizations will struggle to meet the growing demand for services caused by the sluggish economy and decreased government funding. Moreover, they will find it hard to fund new jobs. The proposed cap on the charitable donation is fundamentally at odds with the purpose of the Jobs Act."
Facing such dire fallout, the Senate's Democratic leadership switched to pitching a "millionaire's tax" to cover the cost of Obama's jobs stimulus. That plan, endorsed by the White House, would substitute a 5.6 percent surtax on individuals making more than $1 million a year, raising an expected $445 billion over 10 years.
This idea also could have an adverse impact on charitable contributions in states that tax income, such as Ohio. The well-off do what any other taxpayer does: look to minimize tax exposure. If federal taxes increase, one obvious way to save money is to move to a state without an income tax; Florida typically benefits. And when the affluent move, their charitable donations often move with them.