Clinton Tax Plan Supports Charitable Deduction

March 7, 2016       Mark Hrywna      

The charitable deduction would be exempt from a 28-percent deduction cap and the estate tax exclusion would return to 2009 levels under a tax proposal put forth by Democratic presidential hopeful Hillary Clinton.

The Tax Policy Center (TPC) released an analysis last week of the former Secretary of State’s proposal. TPC is a joint project of the Urban Institute and the Brookings Institution.

The tax benefit from specified deductions and exclusions would be limited to 28 percent. The cap would apply to all itemized deductions except charitable contributions but would reduce the value of deductions and exclusions for taxpayers in the 33 percent and higher tax brackets.

The proposals also would permanently reduce the tax threshold for estate taxes to $3.5 million ($7 million for married couples) with no adjustment for inflation, increase the top tax rate to 45 percent, and set the lifetime gift tax exemption at $1 million. In 2015, the basic exclusion for the estate tax is $5.45 million and Clinton’s plan would return it back to 2009 levels.

The Association of Fundraising Professionals (AFP) and the Alliance for Charitable Reform (ACR) both came out in favor of Clinton’s proposal. AFP, which represents more than 33,000 organizations and fundraisers raising $115 billion annually, issued a statement Friday applauding the plan, specifically the exemption of the charitable deduction.

“Hillary Clinton’s tax plan recognizes the unique value of the charitable deduction by expressly exempting the deduction that would cap itemized deductions at 28 percent for certain families and individuals,” AFP President and CEO Andrew Watt, FInstF, said.

“America’s donors span all socioeconomic strata and play a vital role in American society,” Watt said, providing more than $335 billion in programs and services and accounting for almost 10 percent of the workforce. For every tax dollar invested through the charitable deduction, Watt said nonprofits and the people they serve receive about $2.50 in charitable services in local communities.