Obama Tax Proposals: Danger Ahead for Charities and Civil Society
William Beach /
Here’s a test: Guess who made most of the charitable contributions in 2006, according to the most recent data available from the Internal Revenue Service? If you guessed “taxpayers with high incomes”, you’d win the prize. Now, guess which class of taxpayers the Obama administration wants to discourage from making charitable contributions. If you guessed “taxpayers with high incomes”, you just won again.
The new Obama budget for Fiscal Year 2010 proposes that Congress reduce the tax deduction for charitable contributions by high income taxpayers. That worries many charities who depend on contributions from the well heeled and affluent among us. If the tax incentive to make a deduction is taken away, that might lead some to reduce their giving to charities.
It also should worry those concerned about the future of the civil society, or that collection of institutions, organizations, and non-governmental processes that handle most of life’s challenges in our neighborhoods and social networks. Fewer dollars from upper income neighbors mean less activity by organizations those dollars support.
So, how big a problem could this be? According to the IRS, the 3,656,493 tax returns containing incomes above $200,000 contributed $81,261,387,000 to charities. That’s an average contribution of $22,224. Now 3.6 million returns is only 9 percent of all returns in 2006, but $81.3 billion in contributions is 44 percent of all giving as recorded through the tax forms. The number probably is a good deal higher than that, since many taxpayers do not report all or any charitable contributions on their itemized deductions schedule.