Charitable-Giving Plan Divides Nonprofit Groups and Worries Donors

March 2, 2009, The Chronicle of Philanthropy — As President Obama seeks to reduce the value of the charitable deduction for wealthy Americans, fund raisers and other nonprofit experts are divided over whether his idea would cause any substantial change in charitable giving.

The proposal, which hasn’t even been formally sent to Congress, has already caused some concern among wealthy donors, and could well prompt fund raisers to urge wealthy people to give now so they don’t lose the value of their tax breaks by giving after Mr. Obama’s plan takes effect.

Mr. Obama proposed last week to limit the charitable deduction to help pay for reshaping the nation’s health-care system.

His proposal would affect families that have more than $250,000 in income, beginning in 2011. Instead of saving 33 or 35 cents for each dollar donated, as they do now, those taxpayers would save 28 cents under the Obama plan. Mr. Obama’s overall budget proposal would also increase the taxes owed by the wealthiest taxpayers from 33 or 35 percent up to 36 and 39.6 percent of their income in 2011.

In effect, the proposed budget would increase the cost of giving to charity for wealthy donors by reducing the amount of money they can deduct from their taxes.

Independent Sector, the Partnership for Philanthropy Planning (formerly known as the National Committee on Planned Giving), and other nonprofit groups say that limiting the charitable deduction would put a damper on contributions, especially given the bad economy. Even though administration officials have sought to reassure charities that the economy will be better by 2011 when the provision would take effect, some charity leaders think financial conditions could still be rocky.

“My best guess is that this wouldn’t have a huge effect, but because of the economy it is going to have a worse effect,” said Eileen R. Heisman, president of the National Philanthropic Trust, in Philadelphia.