As part of his plan to fund the American Jobs Act, President Obama is once again seeking to raise the tax rate and decrease the charitable deduction for the people who form the backbone of charitable giving in America. Instead of introducing new ideas, he has only put forward a plan that unleashes old and dangerous ideas into a new and even more volatile setting.
The president has called for an increase in the top tax rate to more than 40 percent for households making $250,000 or more ($200,000 for singles) and a limit on their charitable tax deduction to 28 percent.
This administration has made similar proposals over and over again since 2009. They were bad ideas then, and they are bad ideas now.
For some reason, this administration is unable to comprehend that its ongoing insistence on increasing the tax rate for top earners and capping the charitable deduction is a job- killing measure, not to speak of the potential damage it will do to charities, which are already suffering under the greatest decline in charitable giving in U.S. history.
The math is clear and straightforward:
The charitable sector generates one in 10 jobs in America and any measure that damages support of nonprofits will only mean the loss of more jobs.The high net-worth individuals targeted by the Obama administration make up less than 3 percent of households in America but, according to the Center on Philanthropy at Indiana University, represent somewhere between 50 and 60 percent of all individual charitable donations. That’s more than $100 billion in charitable gifts annually.
In March 2010, the Center on Philanthropy released a report that showed this proposed increase in the top tax rates and the capping of the charitable deduction at 28 percent would cost charities around $4 billion a year.
There are more than 1.5 million small businesses represented in those households that make $200,000-plus, so any tax increase means an increase in taxes on small business— another job killer.
Recommended
Any measure that would create a greater tax burden on those households would, in turn, undermine small business and decrease the support of the charitable sector.
At a time when charities are struggling, we must do all we can to strengthen this vital part of our economy and ensure the charitable services that are needed now, more than ever, are protected and even expanded. The American Jobs Act would do just the opposite.
Join the conversation as a VIP Member