Barack Obama's budget plan could discourage charitable giving

For the fourth time since he took office, President Barack Obama on Monday proposed putting a limit on the percentage of income wealthy donors can write off for gifts to charity.

Under his 2013 budget proposal, which was released Monday, families with incomes of $250,000 or more would be able to write off 28 percent of the amount spent on charitable gifts when they itemize their taxes. Right now, donors can write off 35 percent.

The plan also recommends allowing Bush-era tax cuts for the wealthy to expire and supports requiring families who bring in $1 million or more to pay at least 30 percent of their income in taxes.

Members of the nonprofit community expressed concern that, together, these proposals will discourage the wealthy from donating to charity.

"The president is sending mixed messages to the charitable community," said Sue Santa, senior vice president of the Philanthropy Roundtable, a national network of individual donors, corporate giving officers and foundation trustees, in a news release. "On one hand, he wants to limit the charitable deduction. On the other, he wants millionaires to continue to give to charity while also paying higher taxes."

Nathan Diament, executive director of public policy for the Union of Orthodox Jewish Congregations of America, called the charitable deduction "the most powerful tool America's charities possess to raise funds that enable them to serve their brothers and sisters."

"Even in good economic times, a proposal such as the one put forth in the president's budget would adversely affect America's charities," he said in a news release. "In these distressed times, in which charities are serving more people's needs while at the same time continuing to suffer a downturn in donations, the proposal to reduce the rate of tax deductibility for contributions is a recipe for harmful displacements and cuts in much-needed nonprofit sector institutions and services."

Americans who make more than $200,000 per year donate about $100 billion annually to charity. If the charitable deduction is cut or limited, this figure would likely drop by $5 to $7 billion, according to a study released this month by Dunham+Company, a Texas-based strategic fundraising consulting company and a leader in fundraising research.

Seventy-eight percent of American adults believe the charitable deduction should not be cut or capped, according to the study. Seventy-three percent believe private charities are more cost effective in promoting social good than the government.