Will Obama tax hikes for the wealthy boomerang against the arts?
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Nonprofit arts organizations that count on citizens in the upper income brackets to kick in big donations -- and that would be just about all of them -- may want to put their fundraising efforts on fast-forward this year.
If President Obama has his way, the Chronicle of Philanthropy reported Monday, tax deductions for charitable donations will be capped at 28% starting in 2011 for individuals earning more than $200,000 and joint-filers whose income tops $250,000. The current tax write-off for people in the top bracket is 35%.
So an arts philanthropist donating a $1-million gift to a museum or performance group would get a $350,000 tax break this year, but only $280,000 in 2011.
Besides potentially lessening the tax incentive for the wealthy to give, the president’s tax proposal would end tax cuts for wealthy Americans, restoring the top tax bracket to 39.5%, where it stood before 2001 cuts, slated to last 10 years, reduced the top bracket to 35%. That means the wealthiest donors would have a bit less disposable income to contribute to their favorite charities, arts or otherwise. If the very rich decide to put dollars that they otherwise might have given away into a rainy-day fund to pay the taxman, arts groups and other nonprofits could suffer.
Arts groups probably won’t be able to look to the National Endowment for the Arts to plug any funding leaks that might result: The president’s budget proposal calls for the endowment to get $161.3 million for fiscal 2011, a 3.7% cut from the current $167.5 million. Obama also called for an NEA budget of $161.3 million last year, but Congress kicked in a bit more -- something arts advocates likely will push for again. Obama is proposing identical funding – with an identical cut – for the National Endowment for the Humanities.
-- Mike Boehm