In his Fiscal Year 2012 budget proposal, President Obama again included a cap on the charitable deduction for upper-income taxpayers. The provision proposes to “limit the rate at which high-income taxpayers can take itemized deductions to a maximum of 28 percent, affecting only married taxpayers filing a joint return with income over $250,000 (at 2009 levels) and single taxpayers with income over $200,000,” and it would take effect January 1, 2012. It’s worth noting that the charitable deduction was NOT singled out. Like last year, the cap is on ALL itemized deductions, including the charitable deduction.
President Obama designates the reduction of this tax expenditure as a means to pay for the first three years of extending Alternative Minimum Tax (AMT) relief. Whether the use of this cap as a payfor will make the provision more attractive on Capitol Hill remains to be seen. In last year’s budget, the President married the cap on the charitable deduction to help pay for health care reform. Marrying the cap on the charitable deduction to AMT relief this year is likely intended to increase its trade-off appeal to Republicans in control of the House of Representatives.
Like last year, ACR plans to work with the NonProfit Coalition (that ACR helped to convene) in Washington to educate policymakers on the many benefits the charitable deduction provides in its current form. We intend to be successful.