In yesterday’s Cohen Report, we covered President Obama’s State of the Union address, mining the more than 7,000-word text for items that spoke reasonably directly to the nonprofit sector. We suggested that it looked to us that the president had taken discussion of capping the charitable tax deduction—a policy the administration had proposed for the past few years to help pay for health care reform or job creation initiatives—off the table, at least for 2012. This was in spite of the president’s call for a “Buffett Rule” tax that would promise that no millionaire or billionaire would pay taxes at a rate of less than 30 percent (nearly doubling Republican presidential contender Mitt Romney’s self-estimated tax rate of 15 percent on his 2011 taxes).
NPQquickly received an unsolicited comment from the a White House official who noted on background that while the president’s “Blueprint for an America Built to Last” does contain a provision eliminating tax deductions for taxpayers making over $1 million, the proposal would not apply to charitable deductions.
The White House target appears to be the rules on “carried interest,” which apply to the monstrous incomes of private equity moguls and the low capital gains rates overall (which helped Romney lower his effective tax rate to half that of middle class families whose income depends on work rather than passive investment dividends). These targets might have been successfully challenged during the first two years of the Obama administration, when the Democrats held majorities in both houses of Congress, but that didn’t happen.
Will it happen now? A senior official told the New York Times that the Buffett Rule and other tax changes for the wealthy would occur not as quick legislation, but as parts of more comprehensive tax code overhauls. The official suggested that these changes wouldn’t even be a line item in President Obama’s next budget.
Whether now or later, whether broad-based or specific, the president’s proposed changes to raise the taxes on the wealthy will not affect charitable deductions. The White House told us so. So all the nonprofits that made the charitable deduction the center of their public policy advocacy agenda in 2011 can now focus on something different in 2012—like whether, after serial deficit reduction actions, there will be much or any discretionary federal spending available for nonprofits to serve their communities.