The Wall Street Journal’s lead story today is on President Obama’s proposed budget and how the new tax applications might affect upper income families.  Specifically, it questions whether there will be an affect on charitable giving.

The tax increases would raise an estimated $318 billion over 10 years by reducing the value of such longstanding deductions as mortgage interest and charitable contributions for people in the highest tax brackets. Households paying income taxes at the 33% and 35% rates can currently claim deductions at those rates. Under the Obama proposal, they could deduct only 28% of the value of those payments.

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One concern certain to get attention in Congress: whether a change to the deductions formula would discourage charitable giving among the wealthy, or further depress the housing market given that the interest deduction would fall for some.

So, the question is out there: Is the tax deduction that important for major donors?  Or are they generous simply because they want to do good?  Certainly a $35 or $50 donor who makes under $250,000 wouldn’t be hurt, but will this turn into a funding problem for non-profits as major donors pull back even more?

I think it might be a problem as nearly all donors are only part-philanthropist, while the other part has at least some self-interest.  The ratio of one to the other under this new system is unknown.  Only time will tell.

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