With incomes, investments and charitable donations shrinking, a major reduction in the tax deduction for giving could cripple nonprofit organizations and philanthropic foundations.
The Obama administration proposes to finance a portion of health care reform by cutting the tax deduction for donors with incomes exceeding $250,000 from 35 percent to 28 percent. But various reports show a subsequent loss in giving in the billions of dollars. One study shows a decrease of 4.8 percent, or $3.9 billion, among highest-income households.
With the country still mired in economic hardship and more and more citizens turning to social service agencies, food banks and shelters for assistance, this is not the time for exacerbating a bad situation. Those charities are already reeling from a decline in donations alongside an increase in demand for services. Religious institutions, arts organizations and universities would also suffer additional financial pain.
This is the time of year that United Way organizations around the country launch annual money-raising campaigns, and the national organization is expressing fear over a possible reduction of the tax deduction.
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