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Charitable Deductions Update

By Intellectual Property Law, Esq.

The New York Times had a story today on the possibilities for paying for President Obama's health care proposal. It includes the following:

"Limit income-tax deductions for high earners. This is Mr. Obama?s main idea for raising revenue, but Congress is not likely to pass it except in a greatly scaled-down form.

"He proposed ... making taxpayers in the top income tax brackets ... deduct their mortgage interest, state and local taxes and charitable donations at the 28 percent income tax rate. Democratic leaders immediately objected that that would hurt charities, universities and other entities dependent on tax-deductible donations ....

"Mr. Obama has not given up. He counters that a 28 percent itemized deduction rate for top earners would be the same as under President Ronald Reagan. Just 1.4 percent of households would be affected, the nonpartisan Tax Policy Center reported. The Center on Philanthropy at Indiana University says charitable giving would decrease 2 percent.

"Any compromises would raise less revenue than Mr. Obama proposed. One alternative would exempt charitable contributions from the 28 percent limit. That, however, would provoke governors from high-tax states or Realtors and bankers protective of the mortgage tax break to press for exempting the other categories as well.

"Another idea would maintain the [current] rates for itemized deductions after the Bush tax cuts for the rich expire in 2011 .... That would leave the current break for deductions unchanged, but prevent it from becoming relatively more generous when income taxes rise for affluent taxpayers.

"Even that fallback hit a wall in the Senate Finance Committee. The opposition of Senator Charles E. Grassley, the panel?s senior Republican, carries weight with Senator Max Baucus, the Democratic chairman from Montana, who is determined to produce a bipartisan bill. Both men say any tax increases or cost savings should come from the health sector."

Full post as published by The Art Law Blog on June 26, 2009 (boomark / email).