April 16,2012

Press Contact:

Julia Lawless, Antonia Ferrier, 202.224.4515

Fact Sheet: Buffett Tax Continues Obama Administration’s Assault on Charities

Senate Democrats have bent over backwards to try and hide the fact that the Buffett Tax would undermine charitable giving.  But a close examination of their proposal reveals that it is just their most recent attempt at limiting contributions to charities by capping the value of itemized deductions for upper-income Americans.  Here’s how:  

Section 59B(b)(2)(A) of S. 2230, the Buffett Tax legislation, applies a deduction limitation rule to charitable deductions that is currently dormant in the law --  the so-called “Pease” limitation in Section 68 of the Internal Revenue Code.

The impact would be significant.  According to the non-partisan Joint Committee on Taxation, taxpayers with income of $1 million or more deduct an average of $157,515 annually in charitable donations.  A taxpayer with $1 million of Adjusted Gross Income (AGI) would see the value of a $157,515 deduction reduced by 14% under the Buffett Tax legislation.  Taxpayers with $4.5 million or more of AGI would have the value of a $157,515 deduction cut to $31,503, only 20% of the value of the donation.

This is not just an academic issue.  Many nonprofit organizations receive a large portion of their funding from taxpayers with $4.5 million.

This isn’t the first time President Obama and Senate Democrats have gone after the nation’s churches, soup kitchens, and educational institutions.  The President’s Budgets, and his so-called jobs bill, would have undermined charitable giving by limiting itemized deductions to 28% - restoring the Pease limitation.

Even Democrats once had the good sense to reject limiting charitable deductions.  Then Ways & Means Committee Chairman Charlie Rangel (D-New York) said he was “deeply concerned” about it and would “never want to adversely affect anything that is charitable...” 

And America’s charities balked as well.  Speaking on one of the Obama administration’s previous efforts to limit this deduction, William Daroff, Vice President for Public Policy at the Jewish Federations of North America, said, “[l]imiting the itemized deduction would certainly lead to a significant decrease in charitable contributions. If charities have less resources, they’ll be forced to choose between laying off employees or cutting needed services…In our view, cutting the deduction is like cutting your nose to spite your face.”