Tuesday, March 3, 2009

Concerns Rise on Proposed Obama Tax Changes - Donations to a Church or Charity will be reduced

So much for Mr. Compassionate Obama. His new new tax policy will hurt most of the organizations that actually provide a great service to those in need. Hey Barack! Pat yourself on the back again for a job well done. Say what? Your arm is really sore from all that congratulating yourself that you've been doing! Yes, you've been a busy boy the past few weeks.

It would really be nice to have a President that actually cares about America and Americans!

By Shelly Banjo
from MarketWatch
Dow Jones Newswires
The Wall Street Journal
Last update: 10:22 a.m. EST
March 3, 2009

Donors and charities concerned about tax changes included in President Barack Obama's budget proposal have reason to be worried, according to an analysis by a leading nonprofit research institution.

The proposed changes call for increasing the top personal income tax rate to 39.6% in 2011 from 35%, while reducing the tax benefit from itemized deductions to 28% for couples who make $250,000. For example, donors now in the 35% tax bracket who make a $10,000 donation would get a $2,800 deduction, down from $3,500.

While the tax-dollar impact on itemized deductions may be relatively small, the cumulative effort on giving and on nonprofits could be more damaging, the Center on Philanthropy at Indiana University found.

The center took data on itemized deductions from 2006, the last year of available data, and applied its standard forecasting model with the new tax rules. That model takes into account, among other things, changes in personal income as reported by the U.S. Bureau of Economic Analysis, wealth as measured by the Standard & Poor's 500 index, recent giving history and changes in the highest marginal tax rate.

According to that analysis, if the proposed tax changes were in effect in 2006, total itemized contributions by the highest income households would have dropped by 4.8%, or $3.87 billion. The total value of charitable contributions that high-income households reported on their tax returns in 2006 was $81.26 billion, or more than 40% of all itemized charitable gift deductions, which was $186.65 billion.

"Charities and the public need to understand that in the current economic environment, which is creating difficulty for some nonprofits and their constituents already, this public policy change is likely to have an additional negative effect," Rooney said.

"Nonprofits are already being squeezed by the economy and we need to provide any incentives humanly possible for people to be more charitable," Kane said.

Some donors say that with cash already tight, a loss of tax breaks can only discourage them.

"People are hurting for money and these changes could definitely deter people from giving to charity," said Susan Gentile, a regular donor to the American Cancer Society and Girl Scouts of the USA in Simsbury, Conn. Click to read the entire article
Write to Shelly Banjo at shelly.banjo@wsj.com

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