President Obama's plan to reduce the tax deductions that the wealthy can claim for charitable contributions would very likely diminish giving only modestly, philanthropic experts say.

The proposed change is intended to help fund a national health care overhaul. But during a recession, when charities are already hurting, critics say that even a relatively humble cutback could mean the death of some organizations and cutbacks at others at a time when their services are in increasingly high demand.

Translation? The president's proposal, which would cap deductions for families making $250,000 or more, appears to be on life support.

Hurting Some It Aims To Help

A study by the Center of Philanthropy at Indiana University estimated that the tax change could reduce affluent households' overall itemized charitable giving by nearly 5 percent — or about $3.87 billion — based on an analysis of the Internal Revenue Service's most recent deduction data.

"Anything that would limit charitable deductions at this time is probably not a good thing for charities," says Nancy Pallesen, executive director of the highly regarded Arlington (Va.) Free Clinic.

The clinic provides routine medical care to adults with acute and chronic illnesses. Its clients are typically low-income, uninsured residents of Arlington County, the same people who would be helped under the president's plan to remake how the nation provides and pays for health care.

Pallesen's matter-of-fact assessment has been reflected even more strongly on Capitol Hill, where bipartisan blowback threatens Obama's proposal. If approved this fall as part of Congress's budget package, the change in tax deductions for charitable giving would go into effect in 2011.

Current IRS rules allow families making more than $250,000 to take a tax deduction of up to $350 for every $1,000 they donate to charity. Obama would cap those deductions at $280 for every $1,000 donated. That means that high-income households could avoid taxes on 28 percent of their income that they donate to charity, instead of the current limit of 35 percent.

Treasury Secretary Timothy Geithner last week acknowledged political opposition to proposed tax law changes that would not only limit itemized charitable deductions but also reduce tax deductions that homeowners can take for mortgage interest.

"There is bipartisan opposition to both," says Don Stewart, spokesman for GOP Senate Minority Leader Mitch McConnell. "It's raiding taxes on buying a home and giving to charities."

Democrat Max Baucus, who chairs the powerful Senate Finance Committee, said in a statement last week that he also views the deductions with some skepticism. The new limits, he said, "raise concerns and will require more study."

Underscoring the dire economics faced by organizations that rely on charitable contributions, a new analysis shows that during the deepening downturn, donations to churches have fallen $3 billion to $5 billion behind last quarter's expectation. The United Way has seen a 68 percent increase in calls for food, shelter and clothing assistance, the report says, and agencies across the county have reported shrinking budgets and growing caseloads.