The Obama administration’s proposal to limit tax savings for itemized deductions, including those for charitable contributions, would prompt donors to reduce their gifts by $9.4 billion a year, according to a study by the American Enterprise Institute.
Arthur Brooks, the conservative think tank’s president and author of the study, told nonprofit leaders on Capitol Hill this week that the reduction would cause “massive” harm to their sector, The Chronicle of Philanthropy reported Thursday.
Limiting tax savings on itemized deductions to 28%—down from the current 39.6%—would cause charitable donations to fall by 4%, Brooks said.
He predicted that the top 1% of earners would lose their incentive to give, and would reduce their donations by about 24%.
The Chronicle noted that AEI’s estimate of the effects of a 28% limit were larger than in previous studies.
A 2011 Tax Policy Center’s analysis put the gift reduction at between $1.7 billion and $3.2 billion a year. The same year, Indiana University’s philanthropy center said charitable giving would have dropped by $3.2 billion over 2010 and 2011 combined if the 28% limit had been in effect.