Obama Budget Tweaks to Deductions Going Nowhere

February 19, 2011 at 6:16 PM Leave a comment

CNN/Money analyzes President Obama’s proposed budget and its impact on two popular deductions for those making $250,000 or more annually:

Under his proposal, taxpayers in the 33% and 35% tax brackets would only be able to deduct their [charitable] contributions and mortgage interest payments at the 28% rate. It would affect those with taxable income of $250,000 and up and bring in $321 billion over 10 years, according to the White House.

Their analysis suggests these proposals will go nowhere, as they are up against the powerful real estate lobby and the somewhat less powerful nonprofit sector.

We at Giving Click rent, so from purely self-interested motives we don’t feel strongly about maintaining the full mortgage interest deduction. Given the damage done by the bursting of the bubble created by an over-heated and over-exuberant  real estate market, we’re not sure reducing the reward for taking out big mortgages is such a bad idea generally. The more you tax something, the less you get of it.

Of course, that is the very reason we oppose reduction of the charitable deduction. Tax charitable giving more, you will see less given to charity.

We would further point out that the increase in revenue isn’t that great, given the cost to the nonprofit sector. Even if all the forecasted $321 billion dollars of revenue over 10 years came from change in the charitable deduction by itself, weigh that against the $1.65 trillion deficit the White House projects for this fiscal year alone. If we got the whole $321 billion this year (instead of over 10 years), that would bring our projected deficit for 2011 down to…about $1.33 trillion.

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Entry filed under: Economic Issues.

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News about philanthropy and the charitable instinct

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