Tax change should not affect charities, Obama says

U.S. President Barack Obama smiles during his prime time news conference in the East Room of the White House in Washington, March 24, 2009.

WASHINGTON (Reuters) - Altruism, not a lower tax bill, should be reason for donating to charity, President Barack Obama said on Tuesday.

"If it's really a charitable contribution, I'm assuming that that shouldn't be the determining factor as to whether you're giving that $100 to the homeless shelter down the street," Obama told a nationally televised news conference.

Under the plan announced in Obama's budget in February, tax deductions for charitable contributions from people earning $250,000 a year or more would be limited to 28 percent, down from 35 percent.

Charity groups worry that the change will reduce giving at a time when demand for their services is rising because of the recession.

Obama said it would simply bring the tax benefits for the wealthiest 1 percent of Americans in line with everyone else who gives to soup kitchens, medical research groups and other charities.

"It's not going to cripple them. They'll still be well-to-do," he said.

The weak economy would do more to discourage charitable giving than any changes to the tax code, Obama said.

"The most important thing that I can do for charitable giving is to fix the economy, to get banks lending again, to get businesses opening their doors again, to get people back to work again. Then I think charities will do just fine," he said.

Estimated donations in the United States reached $306 billion in 2007 and seven out of 10 households gave to charitable causes, according to Indiana University's Center on Philanthropy.