Tax plan could hurt charities

March 25, 2009

President Barack Obama

President Barack Obama's proposal to limit charitable deductions for Americans in the top two income brackets could mean $9 billion less in charitable donations, one expert says.

By 2011, Obama's plan would affect about 1.2 percent of households, representing about 18.2 percent of charitable giving itemized on tax returns, says Len Burman, director of the Tax Policy Center.

Given that only about two-thirds of contributions are itemized, Burman estimates the plan to limit deductions would impact about 12 percent of donations.

Assuming that a 1 percent rise in what Burman calls the "tax price" of donations would yield a 1 percent drop in donations, he estimates giving would drop by $9 billion.

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