The Presidential Candidates Agree… Unfortunately, on Capping the Charitable Deduction
Washington is completely, utterly, totally consumed by the upcoming elections on November 6th. The polls, the electoral college maps, the debates, the rallies, the round the clock news coverage. Frankly, we’re exhausted. It’s like living in dog years – every day feels like seven.
So let’s step away from politics and examine a little bit of policy that Governor Romney has been raising in his Presidential bid. That is to put a dollar cap on the amount of deductions a taxpayer can take – a “bucket” that you can fill up with deductions for things like home mortgage interest, charitable giving and the like. And he has of couple of dollar amounts -$17,000, $25,000, $50,000 – by way of example. The Governor has also said that at some point “that number disappears for high-income people.” And, during his entire time in office, the President has repeatedly proposed a cap on itemized deduction although he has taken a different approach, limiting deductions from 35% to 28%. We are looking at variations on a theme not opposite approaches.
As for the Governor’s idea, what would his proposal mean in practical terms? How harmful could it be to the charitable deduction? A recent study by the National Association of Homebuilders (NAHB) suggests it is quite troubling. Their analysis finds that in 2009 an average married couple who itemized took $20,464 in deductions. Of that amount, $10,365 was for the mortgage deduction, $3,667 for state and local taxes and $3,287 for real estate taxes. If the “bucket” is $17,000 that is certainly not good news for the charitable deduction. And if the “bucket” is taken away for high income taxpayers that compounds the problem.
The details on this proposal have yet to be released but from what we’ve seen, we’d like them to go back to the drawing board. As always, we will keep you posted.
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