ANALYSIS: President’s Budget, Chairman’s Proposal Will Weaken Support for Charities

Both Democrats and Republicans continue to disappoint non-profits with their respective plans for the “charitable deduction.” The issue was addressed in both President Obama’s 2015 budget proposal and in House Ways and Means Chairman Dave Camp’s (R-Mich.) draft tax reform bill. Taxpayers have been generally able to deduct donations to charities from their taxable income, thus benefitting from a lower tax burden.

“Charities are facing a serious threat,” said Agudath Israel of America’s Washington Representative, Rabbi Abba Cohen. “That it is coming from both sides makes it all the more
disheartening and ominous.”

Each proposal, in its own way, would put sharp limitations on tax deduction for charitable contributions.  The president is continuing to stick to the approach he has long advocated — that individuals who earn more than $200,000 and couples who earn more than $250,000 would be able to deduct donations to charities at a capped rate of no greater than 28 percent. This is a change from current law, which allows for deductions at higher rates.

Under Chairman Camp’s plan, charitable contributions could only be deducted if they exceed a two-percent threshold of the individual’s adjusted gross income. In addition, among other reductions, the limit on charitable deductions a donor can take for cash contributions would be reduced from 50 percent to 40 percent of such income.  Some provisions would also have the effect of significantly boosting the percentage of people who take the standard deduction, which will result in a decrease in the number of people taking the charitable deduction, since only itemizers can take the deduction.

“There is a direct link between the charitable deduction and charitable giving. The detrimental effect these changes will have on charities, including mosdos in our community, is clear and inevitable,” Rabbi Cohen said. “In these troubled times, when budget cuts are forcing governments to step back, we need to strengthen — not diminish — the ability of these institutions to do their vital work of addressing society’s most pressing needs.”