Obama Tax Plan Would Have ‘Modest’ Impact on Giving, New Study Finds

President Obama’s proposal to limit the value of charitable deductions for the wealthy would cost charities less than $1-billion, according to a new study that gives the lowest estimate yet of how the president’s plan would affect donations.

The study, by the Center on Philanthropy at Indiana University, found that charities would face a much larger drop in donations if the proposed cap were combined with Mr. Obama’s proposal to end the Bush-era tax cuts for wealthy people. In that case, gifts by people who itemize their deductions would fall by more than $2-billion, a report on the study said.

The report characterized that as “a relatively modest decline,” since overall giving to charities totals more than $290-billion. It added, however, that “disincentives for individuals to engage in charitable giving may place additional strain on the nonprofit sector” at a time when revenues from government and other sources are also falling because of economic hard times.

The study was paid for by Campbell & Company, a fund-raising consulting company.

President Obama has proposed several times—including in his 2012 budget— limiting to 28 percent the amount that wealthy taxpayers can write off for their itemized deductions, including charitable gifts. That is down from a maximum of 35 percent now.

He has also proposed raising the top income-tax bracket from 35 percent to 39.6 percent in 2013, giving high-income taxpayers less disposable income.

Both proposals would apply to people with adjusted gross incomes of more than $200,000 ($250,000 for married couples).

The Center on Philanthropy estimated how the proposal to limit the charitable deduction would have influenced donors who itemized their taxes in 2009 and how those donors would have responded if both of Mr. Obama’s tax proposals had been in effect in 2010.

It estimated that giving by people who itemize their returns would have fallen by 0.4 percent, or $820-million, in 2009 and by 1.3 percent, or $2.43-billion, in 2010.

Other recent studies have estimated higher losses from Mr. Obama’s charitable-deduction proposal. The Tax Policy Center projected that it would depress giving by $1.7-billion to $3.2-billion a year. Another study, by Joseph Cordes, an economics professor at George Washington University, estimated donations would fall by $2.9-billion to $5.6-billion.

The Indiana center used an economic model it has developed that takes into account how factors like the economy, the stock market, and personal consumption affect giving based on historical trends—and then calculated how much less donors would have given if Mr. Obama’s proposals had been in effect.

Patrick Rooney, director of the Indiana center, said its estimates were conservative and that other factors could affect giving, such as how soon the changes take effect.

“Ultimately, changes in household economic circumstance have a greater impact on charitable giving than do tax-rate changes,” he added in a statement.

To read more about the charitable deduction and what economists say about how much it matters, see this special section of The Chronicle.