News and analysis
September 30, 2015

Charity Groups Assail Donald Trump's 'Backdoor Tax on Giving'

Andrew Burton, Getty Images

Republican presidential candidate Donald Trump would curtail charitable deductions for high-income people.

Nonprofit leaders gave mixed marks to the tax plan released recently by Donald Trump, a leading contender for the Republican presidential nomination.

While they praised Mr. Trump’s plan for keeping in place the deduction for charitable giving, they warned that aspects of his proposal would discourage gift giving by wealthy donors. Mr. Trump’s plan would offset losses in revenue from lower corporate and individual tax rates by eliminating "loopholes used by the very rich."

In one move to raise revenue, Mr. Trump favors an expansion of the "Pease limitation," which reduces itemized tax deductions — including the deduction for charitable giving — by 3 percent for high-income Americans. The provision affects married couples making more than $309,900 a year.

Mr. Trump said he would "steepen the curve" on the limitation, but he didn’t provide specifics.

Sandra Swirski, executive director of the Alliance for Charitable Reform, a group that represents donors, thanked Mr. Trump for preserving the charitable deduction. But she slammed the real-estate magnate’s plan to enhance what she called a "big clawback" on gifts from wealthy donors.

"We remain concerned that the Pease limitation amounts to a backdoor tax on giving which, we believe, leads to less giving," she said in a statement.

"This penalty for high-income taxpayers could result in a decrease in charitable giving," agreed Andrew Watt, president of the Association of Fundraising Professionals.

Some tax experts argue that the Pease limitation has a minimal impact on charitable deductions because the "clawback" is based on a tax filer’s income, not the amount they give to charity.

Taxpayers subject to the rule "get the full impact of their charitable deduction," said Joseph Rosenberg, a senior research associate at the Urban-Brookings Tax Policy Center at the Urban Institute.

Mr. Rosenberg said that without more specifics, it is unclear what impact Mr. Trump’s plan would have on charitable giving.

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