Lawmaker pans Obama proposal on tax deductions

WASHINGTON -- Rep. Dina Titus on Wednesday came out against a proposal floated by the Obama administration to place a cap on tax deductions for families with incomes of more than $250,000.

Titus, D-Nev., told the House Budget Committee the plan could further harm the housing economy by limiting the mortgage interest deduction.

She further said it could discourage people from donating to charities if there are limits on how much they can write off their federal income taxes.

"Many consider the mortgage interest deduction to be the single most important tax incentive facilitating home ownership," she said. "With the economy in its current state, we simply cannot afford to make changes to the tax code that could lead to a further decline in home prices."

Regarding charities, "It is the wrong time to make changes to the tax code that could make charitable contributions less attractive," she said.

Titus was more upbeat about Obama's support for renewable energy in the budget he outlined last month. She also applauded his decision to scale back the Yucca Mountain nuclear waste project while seeking other ways to manage the radioactive material.

The panel invited lawmakers to present views before work starts on forming the year's budget resolution. Several dozen took the opportunity.

The Obama proposal on tax deductions has picked up little support among key Democrats. Sen. Max Baucus of Montana, the chairman of the Senate Finance Committee, has questioned it, along with Rep. Charles Rangel of New York, House Ways and Means Committee chairman.

Rep. Shelley Berkley, D-Nev., told administration officials at a House hearing last week that she opposed deduction limits for charity donations. Obama has proposed limiting the value of the tax break for itemized deductions to 28 percent for families making more than $250,000.

The proposal would reduce by as much as 20 percent the amount wealthier taxpayers could claim in tax breaks, according to the Chronicle of Philanthropy. Presently, taxpayers who are in the 33 percent or 35 percent tax brackets use that rate to calculate their deductions.

In other words, taxpayers would save 28 cents on their federal income taxes for each dollar donated, as opposed to 33 cents or 35 cents on the dollar.

"We are asking for, I guess, a greater sense of shared responsibility," White House budget director Peter Orszag said in a Feb. 26 interview.

The Obama administration has said the proposal would raise $318 billion over 10 years. The money would be applied to a $630 billion fund to improve health care.

Sen. Harry Reid, D-Nev., has not ruled out supporting it, his spokesman said.

"The total charitable decline would only be about 1.3 percent," Reid aide Jon Summers said in an e-mail. "And offsetting this decline, the proposal would help finance universal health coverage."

Reid believes better health care "would greatly reduce burdens on the charitable sector to provide uncompensated health care to millions of Americans who lack insurance," Summers said.

Orszag has said the plan would only affect the richest 5 percent of Americans, and the effect would be minimal because it would not take effect until 2011, when the Obama administration expects the economy to be into recovery.

Orszag has argued people give to charity out of benevolence, not to get the tax break.

Sen, John Ensign, R-Nev., said Nevada charities have approached him with fears about the proposal.

"Right now if you talk to charities in Nevada, they are hurting," said Ensign, who is on the Senate Finance Committee. "I don't know if this is dead already but I will do what I can to kill it."

Contact Stephens Washington Bureau Chief Steve Tetreault at stetreault@stephensmedia.com or 202-783-1760