But while many charitable-giving experts expressed alarm about how reduced rate for charitable deductions would affect giving by wealthy Americans, others say that Mr. Obama’s proposal may be less cause for concern than it initially appeared.
The reason: Many wealthy Americans who would otherwise be in the 33- or 35-percent tax bracket — and thus able to take that same percentage deduction for their charitable gifts — have used mortgage payments and other deductions to qualify for the alternative minimum tax rate of 28 percent, says Robert F. Sharpe, a Memphis planned-giving consultant.
By paying the alternative minimum tax rate of 28 percent, those wealthy taxpayers are already restricted to the same percentage on their charitable deductions, Mr. Sharpe says. “A lot of the rich are already used to the 28-percent deduction,” which means the Obama proposal would not result in any change for them.
For those wealthy individuals who currently qualify for the 33- or 35-percent rate, however, President Obama’s proposal would have some financial impact.
To illustrate, Mr. Sharpe offers the example of a wealthy donor in the top tax bracket who makes a $100,000 gift. The donor currently would save $35,000 in taxes, or 35 percent of the gift. Under President Obama’s proposal, that same donor would save only $28,000, or 28 percent — a difference of $7,000. (Editor’s note: this sentence originally referred incorrectly to the $35,000 and $28,000 as the amount that could be deducted, instead of the amount saved in taxes.)
Mr. Sharpe says the proposal would unfairly penalize the most generous taxpayers since wealthy people who give nothing to charity would not face such a tax increase.
Impact on Large Institutions
Bruce Flessner, a fund-raising consultant at Bentz Whaley Flessner, in Minneapolis, says the plan would probably have little impact on organizations that have a broad pool of donors. But large institutions — particularly colleges and universities and academic medical centers — could be particularly hard hit if the plan moves forward.
“It seems like unusual public policy to try, as the president announced to the Congress this week, to return the United States to world leadership in access to higher education and then make it more difficult for extraordinary donors to contribute great gifts to colleges and universities,” Mr. Flessner says.
“Likewise, it seems like unusual public policy to penalize the great medical centers that contribute so much to scientific breakthroughs by making it more difficult for donors to make the six-, seven-, eight-, and nine-figure gifts,” he adds.
Eric Kessler, who advises major donors and foundations for Arabella Philanthropic Investment Advisors, says the proposed limits would not likely immediately affect the behavior of the biggest donors, who tend to plot their giving strategically. “I think it has an effect over time, but I don’t think anybody’s going to pick up the paper tomorrow and say, let’s forgo our commitment to the local theater group.”
But he says its could affect mid-range donors — say those who give in the $1,000 range — “who are less driven by strategy and for whom the deduction plays a significant role in their giving.”
Michael W. Peregrine, a lawyer in Chicago who advises nonprofit groups, says charities are now facing a “triple play” that could cut into their donations — the bad economy, the proposed charitable-deduction limits, and proposals by President Obama to end tax cuts for wealthy people that were introduced by President Bush.
He says he worries that charities that are hurting for donations will become more vulnerable to fund-raising scams. “What is certain is that the perception that this will reduce charitable donations in the short term is going to draw out the fraudsters,” he says.
Republicans who oppose President Obama’s budget proposal have also taken aim at the charitable-deduction measure. “During this difficult time, charities provide vital support mechanisms for families in need of help, and this budget is a direct assault on the financial resources they require,�� Eric Cantor of Virginia, the House Republican whip, said in a statement.
But the proposals will not necessarily change giving patterns, says Giving Institute, an association of consultants in Glenview, Ill., and its research arm, Giving USA Foundation.
They noted in a statement that 53 percent of high-net-worth donors surveyed in a 2006 study for Bank of America said their giving would stay the same, or even increase, if the tax deduction for charitable gifts fell to zero.
Giving Institute members have found that “the most important factor in how much people give is how committed they are to the purpose of the request,” the statement said. Furthermore, giving will increase when wealth is created and “if the president’s plan generates more wealth for Americans then giving will go up.”>>>full article at the link above
Obviously that statement should apply to anyone who was forced to participate with the promise of a future benefit.
But that wasn't what was being debated.
That was what would be humorously knows as the twisted of words in an attempt to avoid the actual question and/or debate topic.
You know the one where the accusation was made that there were people here who think:
>> ....... all federal dollars go to "welfare recipients" and dismiss the money that goes to other government expenditures that does help every single person who pays taxes and gives opportunity to as many as possible.<<
And the question was then asked:
>>Why do you care what a few misguided people think?<<
~But I guess we will stop our money that we pledge to our homeless shelter because they are going to take more of our money anyway and we will see if that shelter in our tiny town really gets the extra money that we will no longer be giving!!!!~
>>Mr. Sharpe says the proposal would unfairly penalize the most generous taxpayers since wealthy people who give nothing to charity would not face such a tax increase.<<
What it would do is unfairly penalize the recipients who may receive less as a result.
You know it's funny but I do consider taxes when I make decisions. I just recently lowered all my rents because of the economy. I know $50 is worth $50 to my tenant in the 0% tax bracket and it's only worth $32.50 to me.
I'd rather allow my high quality and hard working tenant benefit from the $50 savings than to get $32.50 more in my pocket. Not to mention it's less of my money the government has to waste on something I deem less worthy.
>>Giving Institute members have found that “the most important factor in how much people give is how committed they are to the purpose of the request,”<<
Very true and of course their ability to give is a factor as well.
But yes--when you have to PAY MORE you have LESS to give away!
It would be known as budgeting. Example:
I am going to give away $10,000--can I afford this? How will it affect me?
It will cost me $6,500. So I can provide $10,000 worth of value for $6,500. Can I spare the $6,500? Yes, I can. I will therefore make the $10,000 contribution.
Fast forward under Obama:
I can spare $6,500. How much is it going to cost me to give away $6,500? It's going to cost me $9027.77. So I now have $9027.77 to give away instead of $10,000.
So in effect--those you'd like to help are affected.
Maybe all those folks getting refund checks and that extra few bucks a week take home pay can pony up a bit. Remember those in her bracket are already paying most of the taxes to support themselves and the rest of the government's needs.
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"Shouldn't this statement apply to the top 2% as well?"
My thoughts exactly.
I just read the article that showed that he wants to put the cap on Charitable donations too.
Whoever said that?
Why are making things up?
There are many interesting points in this article about the change in the deduction for charitable contributions - here are some excerpts:
http://philanthropy.com/news/updates/index.php?id=7244
(snip)
But while many charitable-giving experts expressed alarm about how reduced rate for charitable deductions would affect giving by wealthy Americans, others say that Mr. Obama’s proposal may be less cause for concern than it initially appeared.
The reason: Many wealthy Americans who would otherwise be in the 33- or 35-percent tax bracket — and thus able to take that same percentage deduction for their charitable gifts — have used mortgage payments and other deductions to qualify for the alternative minimum tax rate of 28 percent, says Robert F. Sharpe, a Memphis planned-giving consultant.
By paying the alternative minimum tax rate of 28 percent, those wealthy taxpayers are already restricted to the same percentage on their charitable deductions, Mr. Sharpe says. “A lot of the rich are already used to the 28-percent deduction,” which means the Obama proposal would not result in any change for them.
For those wealthy individuals who currently qualify for the 33- or 35-percent rate, however, President Obama’s proposal would have some financial impact.
To illustrate, Mr. Sharpe offers the example of a wealthy donor in the top tax bracket who makes a $100,000 gift. The donor currently would save $35,000 in taxes, or 35 percent of the gift. Under President Obama’s proposal, that same donor would save only $28,000, or 28 percent — a difference of $7,000. (Editor’s note: this sentence originally referred incorrectly to the $35,000 and $28,000 as the amount that could be deducted, instead of the amount saved in taxes.)
Mr. Sharpe says the proposal would unfairly penalize the most generous taxpayers since wealthy people who give nothing to charity would not face such a tax increase.
Impact on Large Institutions
Bruce Flessner, a fund-raising consultant at Bentz Whaley Flessner, in Minneapolis, says the plan would probably have little impact on organizations that have a broad pool of donors. But large institutions — particularly colleges and universities and academic medical centers — could be particularly hard hit if the plan moves forward.
“It seems like unusual public policy to try, as the president announced to the Congress this week, to return the United States to world leadership in access to higher education and then make it more difficult for extraordinary donors to contribute great gifts to colleges and universities,” Mr. Flessner says.
“Likewise, it seems like unusual public policy to penalize the great medical centers that contribute so much to scientific breakthroughs by making it more difficult for donors to make the six-, seven-, eight-, and nine-figure gifts,” he adds.
Eric Kessler, who advises major donors and foundations for Arabella Philanthropic Investment Advisors, says the proposed limits would not likely immediately affect the behavior of the biggest donors, who tend to plot their giving strategically. “I think it has an effect over time, but I don’t think anybody’s going to pick up the paper tomorrow and say, let’s forgo our commitment to the local theater group.”
But he says its could affect mid-range donors — say those who give in the $1,000 range — “who are less driven by strategy and for whom the deduction plays a significant role in their giving.”
Michael W. Peregrine, a lawyer in Chicago who advises nonprofit groups, says charities are now facing a “triple play” that could cut into their donations — the bad economy, the proposed charitable-deduction limits, and proposals by President Obama to end tax cuts for wealthy people that were introduced by President Bush.
He says he worries that charities that are hurting for donations will become more vulnerable to fund-raising scams. “What is certain is that the perception that this will reduce charitable donations in the short term is going to draw out the fraudsters,” he says.
Republicans who oppose President Obama’s budget proposal have also taken aim at the charitable-deduction measure. “During this difficult time, charities provide vital support mechanisms for families in need of help, and this budget is a direct assault on the financial resources they require,�� Eric Cantor of Virginia, the House Republican whip, said in a statement.
But the proposals will not necessarily change giving patterns, says Giving Institute, an association of consultants in Glenview, Ill., and its research arm, Giving USA Foundation.
They noted in a statement that 53 percent of high-net-worth donors surveyed in a 2006 study for Bank of America said their giving would stay the same, or even increase, if the tax deduction for charitable gifts fell to zero.
Giving Institute members have found that “the most important factor in how much people give is how committed they are to the purpose of the request,” the statement said. Furthermore, giving will increase when wealth is created and “if the president’s plan generates more wealth for Americans then giving will go up.”>>>full article at the link above
Obviously that statement should apply to anyone who was forced to participate with the promise of a future benefit.
But that wasn't what was being debated.
That was what would be humorously knows as the twisted of words in an attempt to avoid the actual question and/or debate topic.
You know the one where the accusation was made that there were people here who think:
>> ....... all federal dollars go to "welfare recipients" and dismiss the money that goes to other government expenditures that does help every single person who pays taxes and gives opportunity to as many as possible.<<
And the question was then asked:
>>Why do you care what a few misguided people think?<<
Don't get suckered in!
~But I guess we will stop our money that we pledge to our homeless shelter because they are going to take more of our money anyway and we will see if that shelter in our tiny town really gets the extra money that we will no longer be giving!!!!~
I'm a bit confused.
Kate
~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~
>>Mr. Sharpe says the proposal would unfairly penalize the most generous taxpayers since wealthy people who give nothing to charity would not face such a tax increase.<<
What it would do is unfairly penalize the recipients who may receive less as a result.
You know it's funny but I do consider taxes when I make decisions. I just recently lowered all my rents because of the economy. I know $50 is worth $50 to my tenant in the 0% tax bracket and it's only worth $32.50 to me.
I'd rather allow my high quality and hard working tenant benefit from the $50 savings than to get $32.50 more in my pocket. Not to mention it's less of my money the government has to waste on something I deem less worthy.
>>Giving Institute members have found that “the most important factor in how much people give is how committed they are to the purpose of the request,”<<
Very true and of course their ability to give is a factor as well.
That was uncalled for.
But yes--when you have to PAY MORE you have LESS to give away!
It would be known as budgeting. Example:
I am going to give away $10,000--can I afford this? How will it affect me?
It will cost me $6,500. So I can provide $10,000 worth of value for $6,500. Can I spare the $6,500? Yes, I can. I will therefore make the $10,000 contribution.
Fast forward under Obama:
I can spare $6,500. How much is it going to cost me to give away $6,500? It's going to cost me $9027.77. So I now have $9027.77 to give away instead of $10,000.
So in effect--those you'd like to help are affected.
Maybe all those folks getting refund checks and that extra few bucks a week take home pay can pony up a bit. Remember those in her bracket are already paying most of the taxes to support themselves and the rest of the government's needs.
Edited 3/3/2009 4:31 pm ET by sandyluv88
>>If you said this because I edited my post...:)
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