Itemized charitable giving would suffer only slightly under the Obama administration’s proposals to reduce the charitable tax deduction for wealthy households and to increase the marginal income tax rates they pay, according to a new study conducted by the Center on Philanthropy at Indiana University.
One proposal would reduce the value of itemized charitable deductions from 35% at present to 28% in 2012 for taxpayers with an adjusted gross income of more than $250,000 for couples or $200,000 for individuals. The other proposal would raise the marginal income tax rate from 35% to 39.6% in 2013 for those taxpayers.
The study, which was sponsored by Campbell & Co., looked at how itemized charitable giving would have been affected in 2009 and 2010 (using historical tax data) if the two proposals had been initiated in those years, respectively.
“Our estimates indicate that if the Administration’s proposals had taken effect in 2009 and 2010, total itemized giving would have declined by 0.4% in the first year and by 1.3% in the second year,” Patrick Rooney, executive director of the Center on Philanthropy, said in a statement.
“This suggests a relatively small direct impact, but combined with the weak economic climate, funding reductions and increased demand for services already affecting some nonprofits and their constituents, these changes are likely to have an additional negative effect in the long term.”
According to the report, total itemized giving would have decreased by an estimated $820 million in the first year and by $2.4 billion in the second year, when both changes were in effect.