Charitable-Giving Plan Divides Nonprofit Groups and Worries Donors

Mr. Kallina said that, while President Obama’s budget faces an uphill battle in Congress, he is worried that the provision lowering the charitable deduction could pass, given the president’s popularity and his party’s majority on Capitol Hill. “It is the honeymoon, and Democrats control the House, the Senate, and the presidency,” he said. “The Republicans are not going to fall on their sword for charity.”

Charities should organize and speak out more about their opposition to limiting the charitable deduction, Mr. Kallina said. “Charities are not united,” he said. “There has been a lack of voices unifying the charitable world.”

Future Tax Breaks
Some fund raisers are less worried about the precise impact of Mr. Obama’s plan and more concerned about the precedent that could be set by reducing the value of the charitable deduction to wealthy donors

“You start worrying about where the slippery slope will end,” said Mr. Flessner “You have a philosophical issue about whether the government should play a bigger role and the private sector should be in a smaller role. There is a question of whether this is a direction in which we want to move.”

The Obama White House says limiting the charitable deduction would make the tax code more fair

Currently, in exchange for gifts, donors are allowed to reduce their taxes by the same percentage as their tax bracket; therefore, wealthier donors who pay a larger percentage of their income in taxes get a bigger write off.

That argument, however, has not gained much traction with experts like Mr. Kallina, the adviser to wealthy donors. Under the Obama budget, he says, “it is absolutely clear that charity is paying for the cost of health care, is that a good policy decision?” Health-care reform should not be done at the expense of giving, he said.