From yesterday's White House press briefing on Obama's budget proposals:
Q Peter, for those who are making more than $250,000, I understand that they're going to be limited in terms of the itemized deductions for their -- filing their taxes, including charitable contributions. Considering that at least one-third of charitable organizations last year took a real nosedive, and you have some big names -- the Salvation Army, Goodwill, American Red Cross -- how do you stop the bleeding when it comes to those charitable groups, considering that you're now taking away an incentive to actually contribute?Aux barricades!
DIRECTOR ORSZAG: Well, let me be very clear. In the recovery act, the President supported -- and contained in the recovery act, there's $100 million to support non-profits and charities as we get through this period of economic difficulty.
In addition, the recovery itself will provide a strong boost not only to charities, but to the overall economy and to the people who contribute to charities. But I think the real question as you look out over time is the following: When a middle-income family makes a $1,000 contribution to a charity, they save $150 in their taxes. When Bill Gates makes that same contribution to that same charity, he saves $3,500 in his taxes. All we're saying is we think Bill Gates should get a $2,800 tax break -- still a lot larger than a middle-income family -- rather than the $3,500 one.
Update (February 28): I was so flummoxed by this example of tax shenanigans that I wrote Andrew Tobias, author of The Only Investment Guide You Will Ever Need, about it. He was kind enough to reply.
Somehow they screwed up the example – it should have read:Now that makes perfect sense, because it's based on the tax rate at the different income levels. I guess I'd better go get the overturned cart out of my street.
When a middle-income family makes a $1,000 contribution to a charity, they save $150 in their taxes. When Bill Gates makes that same contribution to that same charity, he saves $350 in his taxes. All we're saying is we think Bill Gates should get a $280 tax break -- still a lot larger than a middle-income family -- rather than the $350 one.