Senate Budget Plan Calls for Limits to Itemized Deductions, Including Charitable Deduction

Senate Budget Plan Calls for Limits to Itemized Deductions, Including Charitable Deduction

A budget plan introduced by Senate Democrats calls for limits to itemized deductions to help pay for a deficit reduction. 

In the plan (pdf), Senate Democrats cite three potential approaches to capping itemized deductions for high-income taxpayers:

• Limit on the itemized deduction rate. An example of this approach is U.S. President Barack Obama's proposal to cap itemized deductions for high-income taxpayers at 28 percent.
• Percentage of income cap on itemized deductions. Economist Martin Feldstein's 2 percent of adjusted gross income cap is an example of this approach.
• Dollar cap on value of all itemized deductions. Former Gov. Mitt Romney's $17,000 cap on all itemized deductions, which he proposed during last year's presidential campaign, is an example of this approach.

As an alternative to a cap, Senate Democrats also suggest converting the current itemized deduction to a limited tax credit, which is similar to what was proposed by the National Commission on Fiscal Responsibility and Reform (Simpson-Bowles).

CASE signed a March 14 Charitable Giving Coalition letter to Sen. Patty Murray (D-Wash.), chair of the Senate Budget Committee, that urged the committee to reconsider its inclusion of proposals to limit the charitable deduction in its budget plan. CASE will continue to urge lawmakers to preserve the value of the charitable deduction.