28% Cap on Charitable Deduction Would Hit Secular Charities Hardest

A plan to cap the value of the charitable tax deduction would hit colleges, arts groups, and other secular institutions the hardest, leaving giving to churches and synagogues largely unchanged, according to a study released today.

Arthur Brooks, president of the American Enterprise Institute, a conservative Washington think tank, estimated that charitable giving would drop $9.4-billion, or 4.4 percent, in the first year of a 28-percent cap. President Obama has proposed a plan to limit the tax savings that high earners can get for their itemized deductions, including charitable gifts, several times throughout his presidency.

Donations from the nation’s wealthiest taxpayers would drop most significantly if deductions faced new limits, Mr. Brooks says. He projects that the top 1 percent of earners would reduce their charitable gifts by 24 percent. The result, he says, is that “elite” nonprofits that disproportionately receive funds from wealthy donors, including universities, think tanks, symphony orchestras, and some hospitals and environmental groups would be hit hardest.

Giving to churches and religious congregations, he projects, would drop less than 1 percent, while giving to secular causes would dip 7 percent.