White House Doubts Charitable-Deduction Proposal Would Dampen Giving

White House officials say they doubt President Obama’s proposal to place new limits on tax breaks for charitable deductions would dampen giving.

“What drives charitable contributions is overall economic growth, is other motivations,” Peter Orszag, director of the Office of Management and Budget, told reporters, according to a transcript on the White House Web site. “It’s not done for a tax incentive, but rather out of benevolence or some other related desire.”

Furthermore, he said, the president’s plans to revive the sagging economy will “provide a strong boost” to both charities and their donors. He noted that the recent economic-stimulus package had provided money to strengthen charities.

Robert Gibbs, the White House press secretary, agreed that giving could be affected by the economic downturn, which “the president is keenly aware of and hoping to turn around quite quickly.”

Mr. Obama proposes limiting the value of the tax break for itemized deductions, including donations to charity, at 28 percent for families making more than $250,000. That means people in tax brackets of 33 percent and 35 percent would get a smaller break than they do now.

Mr. Orszag said Bill Gates now gets a bigger tax break than a family making the same donation but falling in a lower tax brackets. If Mr. Gates donates $10,000 (the transcript says $1,000, but $10,000 is presumably what Mr. Orszag meant), “he saves $3,500 in his taxes,” he added. “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.”

Tax breaks for wealthy donors were limited to 28 percent when President Reagan left office in 1989, and “I would posit that charitable giving under the Reagan administration was probably pretty robust and just fine,” Mr. Gibbs told reporters, according to a transcript.

Tax experts note that the situation under the Reagan administration was somewhat different, however, because the top tax bracket was then 28 percent, rather than 35 percent. That is why wealthy people could not get a tax break of more than 28 percent.