Obama Proposes Cutting Tax Breaks for Itemized Deductions

Some worry move would hurt charities

President Barack Obama has made several bold proposals in his budget plans. His biggest project is a plan to put $634 billion toward health care reform. It’s a spendy project, and it’s Obama’s job to figure out how to fund it.

Among his budget proposals, he has suggested limiting tax breaks for itemized deductions. That would only apply to families that make more than $250,000 per year or more.

Will people be less charitable?

Itemized deductions include tax breaks for charitable giving. Critics worry that if tax deductions are capped for wealthy people, they won’t donate as much to charity. The majority of donations to charitable causes come from the same income bracket that would experience the decreased tax breaks.

Obama’s proposal

The 2010 budget proposal that Obama has laid out calls for a 28 percent limit on the value of the tax break for itemized deductions. So, for every dollar donated to charity, people who make more than $250,000 would save 28 cents on their taxes.

Currently, the rate people save on itemized deductions is about 20 percent higher than the proposed cap. So the wealthiest people can save 48 percent on itemized deductions.

Bringing in big money

The cap on itemized deductions would raise $318 billion. That would get the president about halfway to his $634 billion health  care goal, which is aimed at making health care more affordable and available to everyone in the United States.

The itemized deduction cap would also apply to deductions for mortgage interest.

Charities worry about funding

Independent Sector, a coalition of charities and foundations, and the Council on Foundations  have said they are worried that they will get less funding as a result of the limit on tax breaks. A study from Indiana University says it’s possible that billion of dollars in charitable giving are at stake. Others say the effects of the change could be limited as far as charity donations go. ... click here to read the rest of the article titled "Obama Proposes Cutting Tax Breaks for Itemized Deductions"