Rich Donors May Be Undeterred by Tax Caps on Charitable Gifts

Melissa Berman, president and chief executive of Rockefeller Philanthropy Advisers, which counsels individuals and corporations on giving away money, said tax savings typically rank far below the imperative to give back to the community or a sense of responsibility in surveys examining the motivations of wealthy donors.

Giving More
While she said Obama’s proposal may send a bad message at a time when people are adjusting their philanthropic habits to the recession, some donors may be compelled to give more out of sympathy for those who are struggling.

“We have no real precedent to know how people’s behavior may change,” she said.

Stretch also said the concerns may be overblown. Churches in particular aren’t likely to suffer because many of their donors will continue to tithe 10 percent of their income and aren’t motivated to give by tax savings. Tens of millions of other people also donate to charities including churches without being able to deduct their contributions.

In addition, he said many households at the lower end of the top brackets already effectively have the value of their deductions reduced to 26 percent or 28 percent by the alternative minimum tax, which was designed to limit the use of deductions and exemptions by the wealthy.

Minimum Tax
Between 1990 and 2001, a period when the minimum tax was increasingly capping deductions for six-figure income households, deductions for charitable giving grew at an annual rate of about 8.4 percent, according to a study by the Internal Revenue Service.

Charitable donations hit a record in 2007, according to the Giving USA Foundation, a research organization in Glenview, Illinois. The group said American individuals donate $200 billion annually. IRS statistics show about 3.6 million U.S. households with adjusted gross incomes of more than $200,000 deducted about $87.8 billion in charitable gifts in 2006, the last year for which data was available. As many as 84 million in the U.S. also may donate without claiming tax deductions, according to the Independent Sector.