Tag Archive for charitable contributions

Impact of Proposed Tax Changes on Charitable Deductions

I’d heard a little about this back pre-Super Committee when Obama was offering the “Grand Bargain,” but hadn’t tracked it very closely, and assumed that it was a massive change (doing away with the deductability of charitable contributions) which probably wouldn’t happen.

Today, I ran across The Center on Philanthropy at Indiana University’s analysis from October, and it appears that it’s a more targeted reduction (and not particular to charitable contributions).  As I was reading the first couple of pages I thought, “Wow, this is an interesting analysis, but it really needs an executive summary.”  And then I kept going and discovered that *was* the executive summary.

So here’s my attempt at summarizing:

Proposed Tax Changes

  • Top marginal rate to be restored from current 35% to previous 39.6%.
  • Deductions (of all types, not just charitable contributions) for high income households ($200K+ AGI individual, $250K+ married) to be capped at 28% vs. today’s 35%.


Rich people will give less, because (1) They’re paying more in taxes, so have less to give; and (2) The tax benefit they get from donations decreases.


Yes.  Charitable giving is expected to go down, something like $800M in the first year, and $2.4B in the second year.  This is off an expected baseline giving of $197B in the first year and $185B in the second year, so amounts to about 1.3%.  The amount of additional tax revenue expected by these changes is 2013 is $138B, at a time when the annual deficit is projected to be $691B.

See the report for more details about the model, the history, the impact if only one or the other of the proposed changes goes through, and lots more prose apparently written by accountants.

Personal Thoughts

Sure, it’s hard for non-profits to take an added hit when they are already struggling, and the demand for services is going up.  But if we’re talking about $138B in deficit reduction for a $2.4B loss in giving, I think it’s a worthwhile trade.  Note also that projected giving between the two years is projected to drop from $197B to $185B, and only $2.4B of that is due to the tax changes.  The other $9.6B (exactly 4x as much) is due, if I understand the model correctly, to the downward momentum of the economy.  So, working to improve the economy, say, by reducing the deficit, would actually be addressing the bigger issue.

Based on this report, I will be unpersuaded by non-profits that argue that these tax changes will be life-threatening to them.