|February 24th, 2015, 01:56 PM||#1|
Join Date: Nov 2012
A bad proposal
Obama Tax Proposal Would Slash Charitable Donations
President Barack Obama has once again proposed to limit the value of the charitable tax deduction for high-income contributors — a move that would cut charitable giving by nearly $10 billion and in the end hurt those it is intended to aid.
Obama in his budget asked Congress to limit the value of a deduction for a charitable gift made by high-income households to 28 percent, even though the top tax rate this year is 39.6 percent for those with taxable income of at least $464,850.
The administration claims the proposal would "make the tax code more equitable" because the value of the tax deduction is proportional to one's tax bracket "so it is less valuable to those in the lower brackets."
But the proposed limit would have negative and possibly unforeseen effects, according to a Forbes.com article by Howard Husock, vice president for policy research at the Manhattan Institute.
Husock cites research showing that in one recent year, just 2.6 percent of American households had an adjusted gross income of more than $200,000. These households accounted for 25.1 percent of all income and 29.5 percent of the total value of charitable donations made by all households.
Because the high earners account for such a large proportion of charitable giving, imposing "what amounts to a tax increase on such giving would, not surprisingly, reduce charity overall," Husock states.
He notes that economist Arthur Brooks, head of the American Enterprise Institute, has estimated that the decline would be around $9.4 billion, out of annual donations of some $220 billion.
But the impact would be greatest in the blue states where the high-income donors are concentrated. Of the 4.5 million high-net-worth itemizers in the country, nearly half are concentrated in nine blue states, ranging from 708,000 in California to 100,000 in Connecticut. All these states voted for Obama in 2012.
And since charitable contributions tend to focus on organizations close to home, Husock observes, charities in these states would suffer the most.
In a further irony, the proposed change in the tax code would impact lower-income Americans as well as the wealthy contributors. Around 80 percent of high-income donors make donations to organizations that provide for the "basic needs" of the poor in education, healthcare, the economy, and other areas.
So the proposed tax code change would ultimately cost the very people it is designed to benefit.
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|February 24th, 2015, 03:32 PM||#4|
Join Date: Jan 2015
|February 24th, 2015, 11:36 PM||#5|
I'm debt free
Join Date: Nov 2012
Location: Lebanon, TN
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