The Good News and the Bad News About Obama’s Reduction of the Charitable Deduction

As a follow-up to this, we have this:

Here’s what it means in real terms for the 5% of Americans whose household income exceeds $250,000 a year. Those families can currently save $350 in taxes for every $1,000 donated to charity; under Obama’s plan, that amount would drop to $280 per $1,000 donation.

“By doing this, you raise the cost of giving” said Roberton Williams, a senior fellow at The Tax Policy Center, a liberal Washington think tank.

By Williams’ calculations, the change will result in a 10% drop in charitable giving by wealthy Americans, who typically contribute about 20% of all charitable dollars. In real dollars, Williams projects a decline of about $6 billion in charitable donations because of the change.

At the same time, Williams said religious institutions may be spared because most wealthy Americans funnel their biggest donations to education, the arts and health care. Think campus buildings, art museums and hospital wards with family names attached.

“My guess is that religious groups will not see nearly the drop that other charitable recipients will see,” Williams said.

That leaves religious groups at the mercy of rank-and-file members and donors who have been tightening their belts in the economic downturn. For now, experts say, religious groups are probably on fairly safe ground.

The good news is that churches, especially conservative ones, will probably not be affected by this.  That’s why the big hue and cry against this is coming from the liberal charities.  I still think that the Obama Administration has unfavourable plans for conservative churches (his shoving abortion down the throats of medical providers for instance,) but this isn’t one of them.  Even eliminating the charitable deduction altogether would hit conservative churches less than their liberal counterparts, church and otherwise.

The bad news is that the promise of wealth flowing into the hands of charismatic people on account of their “faith” and giving is unfulfilled, as I noted almost four years ago in If You’re Going to Take the Land, Take It.

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