President Biden’s first budget proposal calls for a big boost in domestic spending to help low-income people while proposing certain tax increases that could boost incentives for charitable giving, experts say.
Nonprofits advocates — also noting the absence of an effort to limit the value of itemized deductions, including contributions to charity — generally gave the budget plan high marks.
Michael Nilsen, vice president of communications and public policy at the Association of Fundraising Professionals, noted in an emailed statement that Biden’s budget proposes increasing the capital-gains tax on the wealthy, plus changes to estate taxes that “could cause heirs to incur significant capital-gains taxes.”
Nilsen added: “These increases could create a strong incentive for some taxpayers to contribute property or shares of stock to charity, as we know that tax and financial incentives play a key role in giving decisions as the amount of money involved gets larger.”
In an analysis that will publish later Tuesday, the National Council of Nonprofits notes that the budget calls for a 16 percent increase in domestic spending. David Thompson, vice president for public policy at the council, said that such strong growth in domestic spending likely would mean extra revenue for nonprofits that contract with the government to provide services to poor and low-income people.
The council also praised the budget and associated documents for proposing to make “permanent several temporary tax provisions, including the expanded Earned Income Tax Credit, the Premium Tax Credit, the Child Tax Credit, and the Child and Dependent Care Credit.”
However, Thompson expressed disappointment that the budget does not call for an extension of a tax deduction available to people who don’t itemize their tax returns.
Itemized Deductions
Nonprofit advocates have been worried about efforts to limit the value of itemized deductions since the idea was proposed by President Obama in his first budget, and Biden had sent worrisome signals that he would pursue that policy as well. Its omission from Biden’s budget “is a win for the charitable community,” the council said.
Thompson warned that the president’s budget is only a proposal that will see significant changes in Congress, and there is nothing preventing Biden from proposing new limits on deductions in the future.
However, in his speech to Congress last month, Biden made no mention of trying to impose new limits on how much wealthy people could deduct from their taxes. Cynthia Lewin, co-chair of the nonprofit law practice and a partner at Venable, said a president’s first budget is typically the blueprint for the broad policies he will pursue throughout his term in office, and Lewin thought it unlikely that Biden will reverse course on limiting deductions.
“We should view what he’s putting down as where he wants to go,” Lewin said. “I think we should take this as his views.”
