The Chronicle of Philanthropy reports that Obama's proposal to limit the deductibility of gifts for the wealthiest Americans has generated an outburst of criticism. While of course it is much too soon to tell how the proposal might eventually be translated into the tax code, I am interested in what you think of it.
The effect of the proposal would be to limit the tax deductibility of all itemized deductions to 28% of their value, down from 33 or 35% depending on the total Adjusted Gross Income (AGI) of the taxpayer. If the taxpayer's AGI was $250,000 or more a gift of $100,000 would only result in a $28,000 deduction from the taxes owed, rather than a $33,000 or a $35,000 deduction depending on which tax bracket the taxpayer was in (i.e., 33% or 35%).
Many of the highest earning taxpayers already cope with a 28% limit on deductibility because they are captured by the Alternative Minimum Tax (AMT).
Estimates are that it could reduce total giving in the United States by $3B, a 1% drop from the $303B in gifts made last year.
So, what do you think? Will this stifle charitable giving? Will you (if you are lucky enough to be a high earner) give less?
And while it certainly is nice, why should we expect the government to subsidize our charitable giving anyway?
I would appreciate your comments while I attempt to form an opinion on this issue. I am sure that I will be asked, so give me your thoughts.