Limiting tax deductions for charitable contributions would undermine churches and other nonprofit community groups, Utah Senator Orrin Hatch said at a Senate Finance Committee hearing today.
Hatch urged the Obama administration to back away from a proposal to cap at 28 percent itemized deductions, including the one for charitable contributions, for individuals earning more than $200,000 a year and married couples earning more than $250,000. Such deductions now are capped at the top marginal tax rate of 35 percent.
“I am deeply concerned that the current deduction for charitable giving is under quiet assault,” said Hatch, the panel’s top Republican, at a hearing examining possible changes to the tax treatment of charities.
The proposal for the 28 percent cap on deductions for high earners was included in President Barack Obama’s $447 billion jobs package unveiled last month.
Senator Max Baucus, a Montana Democrat and the Finance Committee’s chairman, said taxpayers at varying income levels tend to give to different types of charities. Higher-income households contribute more often to health causes, he said, while lower-income families tend to give more to religious or basic-needs charities.
Variance in ‘Subsidies’
“This results in the tax code giving large subsidies to some charities and smaller subsidies to others,” Baucus said. He did not offer an opinion on the Obama administration’s proposal.
Baucus said about 27 percent of U.S. filers claimed a charitable contribution deduction on their tax returns last year.
Dallin H. Oaks, a member of the governing body of the Church of Jesus Christ of Latter-day Saints in Salt Lake City, told the panel that the deduction is built into the financing of charities, which are responsible for millions of jobs. He said he opposed limiting the deduction.
“I speak of private educational institutions, hospitals, social welfare agencies and innumerable other organizations ministering to the needs of children, youth, the aged, the poor and citizens generally,” Oaks said.
Decline in Donations
Brian Gallagher, president and chief executive officer of Alexandria, Virginia-based United Way Worldwide, said limiting the deductibility of donations for the highest earners would lead to a decline in contributions by the 26,000 people who annually give $10,000 or more to United Way in the U.S.
Gallagher said a survey of those donors indicated that “any change to that would have a major impact on their giving.”
At current levels of contributions, the deduction for charitable donations would cost the government about $230 billion in forgone revenue between 2010 and 2014, according to the Joint Committee on Taxation.