Politicians, on the other hand, seem to believe that all philanthropy should be motivated solely by charitable impulses. I suspect that in their world, the charitable deduction itself is pointless, and should be abolished.
The administration is trying to calm the worried charities, reports Tax Notes Today ($).
Gains in the S&P 500 over the last few months are more than enough to offset the adverse effect that President Obama's 2010 budget proposal might have on charitable giving, said Jeffrey Liebman, executive associate director of the Office of Management and Budget, on May 27.
Yes, the stock market gains since the March lows are impressive. No, I don't think that the wealthy will consider these gains sufficient to cause a spurt in charitable giving. The frame of reference for the wealth effect has to take into account the highs of 2007, not just the recent lows. And it has to take into account the collapse of real estate values as well. I don't buy Mr. Liebman's glib assertion.
Still, two more plausible siren songs were pitched to charities to get them on board at the same Washington, DC meeting. The very real short term benefit to fundraisers of a loss of tax benefits scheduled at a future date (the President wants to begin the cap in the 2011 tax year) is that wealthy taxpayers will undoubtedly accelerate their donations to take advantage of higher tax benefits while they can. Now, suddenly, tax changes do have behavioral effects!
Longer term, nonprofits are being squeezed by health care costs as hard as everyone else. Some $48 billion is spent by nonprofits on health care for their employees, coming in at 4.6% of total expenditures. They would like to see that cost go down—would that be a consequence of a federal takeover of the health care industry?
I dunno—is the cost of buying a new Chrysler vehicle projected to fall dramatically?
The Senate has already passed a resolution rejecting the caps, but that is not likely to be the last word on the subject.
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