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President Obama Responds to Question Regarding Charitable Deductions
During a Tuesday evening prime time press conference, President Obama responded to a question from Politico's Mike Allen, who asked if the President was reconsidering his plan to cut the interest rate deduction for mortgages and for charities contained in the administration's current budget proposals?
Mike Allen, Politico? Hi, Mike.
QUESTION: Mr. President, are you -- thank you. Thank you, Mr. President. Are you reconsidering your plan to cut the interest rate deduction for mortgages and for charities? And do you regret having proposed that in the first place?
OBAMA: No, I think it's -- I think it's the right thing to do, where we've got to make some difficult choices. Here's what we did with respect to tax policy.
What we said was that, over the last decade, the average worker, the average family have seen their wages and incomes flat. Even in times where supposedly we were in the middle of an economic boom, as a practical matter, their incomes didn't go up. And so, well, we said, "Let's give them a tax cut. Let's give them some relief, some help, 95 percent of American families."
Now, for the top 5 percent, they're the ones who typically saw huge gains in their income. I -- I fall in that category. And what we've said is, for those folks, let's not renew the Bush tax cuts, so let's go back to the rates that existed back in -- during the Clinton era, when wealthy people were still wealthy and doing just fine, and let's look at the -- the level at which people can itemize their deductions.
And what we've said is: Let's go back to the rate that existed under Ronald Reagan. People are still going to be able to make charitable contributions. It just means, if you give $100 and you're in this tax bracket, at a certain point, instead of being able to write off 36 percent or 39 percent, you're writing off 28 percent.
Now, if it's really a charitable contribution, I'm assuming that that shouldn't be the determining factor as to whether you're giving that $100 to the homeless shelter down the street.
And so this provision would affect about 1 percent of the American people. They would still get deductions. It's just that they wouldn't be able to write off 39 percent.
In that sense, what it would do is it would equalize -- when I give $100, I'd get the same amount of deduction as when some -- a bus driver who's making $50,000 a year, or $40,000 a year, gives that same $100. Right now, he gets 28 percent -- he gets to write off 28 percent. I get to write off 39 percent. I don't think that's fair.
So I think this was a good idea. I think it is a realistic way for us to raise some revenue from people who've benefited enormously over the last several years.
It's not going to cripple them. They'll still be well-to-do. And, you know, ultimately, if we're going to tackle the serious problems that we've got, then, in some cases, those who are more fortunate are going to have to pay a little bit more.
QUESTION: It's not the well-to-do people. It's the charities. Given what you've just said, are you confident the charities are wrong when they contend that this would discourage giving?
OBAMA: Yes, I am. I mean, if you look at the evidence, there's very little evidence that this has a significant impact on charitable giving.
I'll tell you what has a significant impact on charitable giving, is a financial crisis and an economy that's contracting. And so the most important thing that I can do for charitable giving is to fix the economy, to get banks lending again, to get businesses opening their doors again, to get people back to work again. Then I think charities will do just fine.
Last week the Planned Giving Design Center conducted a survey of readers and asked how they believe the proposed itemized deduction rate reduction would affect donations from those making over $250,000. Click here to go to the survey. Revised results will be shown after you have voted.