May 7, 2010
The Charitable Deduction? It’s Not Done with Yet?
Why are we still talking about Congressional proposals to limit the charitable deduction? Hasn’t this issue been put to bed?
Washington is in an unprecedented revenue hunt. And from a policymakers’ perspective, the revenue cupboard is empty. The House and Senate can’t find $30 billion to pay for a tax package that includes the IRA charitable rollover. They would like to pass a small business tax bill but they don’t have the money for that either. And they really don’t have the $100 billion-plus they need to prevent the tax on dividends from jumping from 15 to over 40 percent.
Enter the charitable deduction. It is a tempting target. The Obama Administration is already on board with capping the deduction at 28 percent. Others want to keep the deduction at the current maximum of 35 percent, even AFTER the top rate is expected to float back up to 39.6 percent in 2011. These limits would raise billions. And billions is what Congress desperately needs. But at what cost? Both studies and anecdote suggest that a cap on the deduction could chill charitable giving.
So, that’s why we’re still meeting with Members of Congress. They are desperate and we are a tempting target.