Wednesday, December 5, 2012

Fiscal Cliff Chatter

The papers have been abuzz about fiscal cliff negotiations and several threads of the discussion involve charities and other nonprofit organizations.  

One recent item in the New York Times reports that "some analysts doubt dire predictions on tax increase fallout."  They argue that "much of the investing world has overestimated how hard the markets and investors would be hit if tax rates on dividends and capital gains rise . . .."  The reason is that ever fewer investors are subject to taxes on their investment gains.  Many hold those investments in retirement accounts that are exempt from taxation.  More relevant for purposes of this blog, many investors avoid taxation because they are "institutional investors like insurance companies and pension funds that are exempt from taxes."

Another recent NYT article reports that a group of "Democratic luminaries," including two former Treasury secretaries and two former White House chiefs of staff, have proposed compromise plan to raise revenue, cut deficits, and avoid the fiscal cliff.  Among other suggestions, the group calls for "replacing popular itemized deductions . . .."  The scope of the home mortgage interest deduction would be significantly reduced.  The deduction for charitable giving, however, would receive more generous treatment and "would be as high as 28 percent."


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