President's Budget Plan Expected to Propose Cap on Tax Deductions for Wealthy

The Obama administration's budget plan for the 2014 fiscal year is expected to include a 28 percent cap on tax deductions for the wealthy, the reports.

Although a cap on tax breaks, including the deduction for charitable gifts, has been on the administration's wish list since Barack Obama took office in 2009, the idea has gained traction among Republicans and Democrats in recent months as policy makers look for ways to reduce deficit and national debt. Many organizations that would be affected by such a cap — including nonprofit organizations, home builders, and city and state leaders — have spoken out against the proposal in letters to Congress and at public forums. But spokespeople for some of those groups recently told the Journal that, despite their lobbying efforts, they do not expect the administration to alter its plan. "We've reached out to folks in the administration," said president Diana Aviv, "and it's clear to me from what's being said to us unofficially...[that] they are not making changes to the proposal."

The proposal to cap itemized deductions and other tax breaks for households earning more than $250,000 a year at 28 percent would raise about $423 billion over ten years, the Journal reports. For their part, nonprofit organizations warn that such a cap would reduce charitable giving by an estimated $9 billion annually — an amount that could be used to fund "nights in a homeless shelter, assistance with utility bills, or food in a food pantry," said Steve Taylor, senior vice president of .

Nevertheless, lawmakers on both sides of the aisle are beginning to accept the inevitability of such a cap as part of a broader plan to address the nation's budget deficit and $16 trillion debt. As Steve Bell, senior director of economic policy at the , told the Journal, if a deficit-reduction deal can be reached, the cap on deductions "is the tack people will take," even though "there will be a lot of hell" from groups affected by the change.

John D. Mckinnon. "." Wall Street Journal 04/04/2013.