Two proposals have been introduced by Congress to fund healthcare reforms by reducing charitable deductions for those who earn more than $200,000 (and those couples and families who earn more than $250,000).

 

In his FY10 budget, President Obama proposed limiting itemized deductions for these taxpayers at a 28 percent rate beginning in 2011. An alternative, modified proposal also has been suggested that would limit itemized deductions to 33 percent or 35 percent, for taxpayers whose income tax brackets would increase to 36 percent or 39.6 percent in 2011.

 

Although President Obama has continued to advocate in favor of his limitation on itemized deductions to fund healthcare reforms, at this point, two other major funding mechanisms have been proposed for healthcare reforms.

 

The House recently introduced a bill that would fund healthcare reforms by imposing a surtax on the wealthy. In response, some in the Senate, including some Democrats, have been fairly vocal about their opposition to this approach.

 

Another proposal informally introduced by the Senate Finance Committee that would tax employer health benefits was strongly opposed by the Senate Majority Leader, Sen. Harry Reid (D-NV), and President Obama.