President Barack Obama’s proposed jobs creation legislation would limit the value of itemized deductions to 28 cents for each dollar spent by individuals with adjusted gross income exceeding $200,000 and couples whose AGI is greater than $250,000 per year. The limitation would reduce the reduce the value of charitable contributions. This week the Wall Street Journal and the Chronicle of Philanthropy feature articles profiling the reactions of some charities to the proposal. The following quote from the Chronicle illustrates the viewpoint of many charity executives–
“Limiting the itemized deduction would certainly lead to a significant decrease in charitable contributions. If charities have less resources, they’ll be forced to choose between laying off employees or cutting needed services,” said William C. Daroff, vice president for Public Policy at the Jewish Federations of North America. “Nonprofits employ almost 10 percent of the work force nationwide, and in many states nonprofits are the largest employers. In our view, cutting the deduction is like cutting your nose to spite your face.”
According to another article, some charities claim that the bill could produce a reduction in total annual charitable giving of as much as $7 billion. See Plan To Limit Charitable Deductions For The Wealthy Is Back… Again.
Though controversial, this particular provision of the proposed law is not new. The same plan to limit itemized deductions appeared in President Obama’s 2009 budget proposal. See Obama Budget Plan Includes Limit on Charitable Deductions.