President Obama on Monday proposed to limit the percentage of income that wealthy donors can write off for gifts to charity and for other purposes, such as medical expenses and housing costs.
The plan, which is included in the president’s newly released 2013 budget proposal, would limit the value of the itemized deduction to 28 percent for couples with incomes of $250,000 or more and individuals with incomes of $200,000 or more.
The White House says its proposed limits on itemized deductions would reduce the deficit by $584-billion over 10 years.
Mr. Obama has made similar proposals four other times during his presidency, including in his proposed budget for 2012. The idea has never gotten very far, in part due to strong opposition from charities. (See all the stories from The Chronicle analyzing the charitable deduction.)
Giving by wealthy donors could also be affected by another proposal in the budget plan.
He suggested that every household with more than $1-million in earnings annually would be required to pay at least 30 percent of their income in taxes—a provision known as the “Buffett rule,” because of Warren Buffett’s complaint that he pays less in taxes than his secretary.
The increased taxes could dampen the amount people who are millionaires and billionaires give to charity, but President Obama acknowledged he wanted to be sure that did not happen and pledged to structure the tax code in a way that would not “disadvantage individuals who make large charitable contributions.” He made a similar promise after his State of the Union address.
The Buffett Rule would replace the alternative minimum tax, which was originally designed to prevent wealthy Americans from escaping taxation by taking advantage of loopholes in the tax code but now affects a growing number of middle-class Americans.