Obama's Proposal to Reduce Charitable Tax Deductions

The Chronicle of Philanthropy reports that President Obama has proposed reducing the amount of charitable deductions that wealthy individuals can claim on their taxes. So far, analysis of the potential effects is mixed, but the Indiana University Center on Philanthropy estimates that this proposal could cause giving by the wealthy to drop by several billion dollars annually.

The tax money gained by reducing the deduction would be used to fund affordable healthcare for Americans, certainly a noble cause.

This recalls the difference between European and American philanthropy. Philanthropy in Europe is much less established, in part due to a taxation structure that does not reward charitable donors, while providing a social safety net that is much more extensive than the one
we have in the U.S. (and thus decreasing the need for the nonprofit sector).

To me there are some pros and cons here. I appreciate that European governments provide so many services to their citizens, and I believe it is criminal that we do not provide healthcare to our people. At the same time, I can't help but think about the high level of innovation that flows from the United States' nonprofit sector, stimulated by human need and charitable donations.

Claire Gaudiani argues that American-style philanthropy is unique to our country. I saw her at an APRA conference a few years ago. She was a great speaker who really inspired me to think about the strengths of America's nonprofit sector. She spoke of the amazing things that American philanthropy has accomplished, from the eradication of polio to the establishment of some of the best universities in the world. I haven't yet read Gaudiani's book, The Greater Good, but it is definitely on my list. I'll report back when I do read it.

I'm curious to hear from you, dear readers. Will decreasing the charitable tax deduction discourage donations? Is a trade-off of some private philanthropy acceptable in return for a public healthcare system? Would you want to see a European-style safety net at the expense of the American-style nonprofit sector? Do you think these concepts are necessarily at odds?