Some taxpayers say they will try to hold on to more of their money by making less.

President Barack Obama’s budget proposals have drawn the line: $250,000. Many tax hikes and phased out credits will apply to households with annual incomes that cross that line.

A pretty small group of people fall into this category: incomes so close to $250,000 that they could manipulate them to be just lower than the quarter-of-a-million mark.

Always seeking opportunities

Not all people who make this approximate income are opposed to paying the higher taxes. Many people are perfectly happy just having enough money to be comfortable and live without needing payday loans.

However, I can’t say that I was surprised today when I came across an article from ABC News that reports on ways people are trying to skirt taxes.

It’s true, people who make just more than $250,000 could stand to lose more money than they would if they pull in $249,000 instead.

Scaling back business

People with incomes in this range generally are not paid hourly and have plenty of vacation days. So avoiding the extra taxes is more complicated than just skipping work for a few days.

An attorney in Louisiana says she will scale back her business if the Obama tax increases pass. She says she will take on fewer clients to ensure her income falls below the $250,000 mark.

More retirement money

Other workers who have incomes near this range are planning to have more money taken out of their paychecks and put into 401ks.

There are other ways to manipulate the bottom line, such as attempting to recognize losses and pushing gains to years when your income is lower.

Why the fuss?

Dr. Sharon Poczatek, who runs her own dental practice in Boulder, Colo., explains the mentality behind trying to avoid the taxes.

“The motivation for a lot of people like me – dentists, entrepreneurs, lawyers – is that the more you work the more money you make,” said Poczatek. “But if I’m going to be working just to give it back to the government — it’s de-motivating and demoralizing.”

President Barack Obama has made several bold proposals in his budget plans. His biggest project is a plan to put $634 billion toward health care reform. It’s a spendy project, and it’s Obama’s job to figure out how to fund it.

Among his budget proposals, he has suggested limiting tax breaks for itemized deductions. That would only apply to families that make more than $250,000 per year or more.

Will people be less charitable?

Itemized deductions include tax breaks for charitable giving. Critics worry that if tax deductions are capped for wealthy people, they won’t donate as much to charity. The majority of donations to charitable causes come from the same income bracket that would experience the decreased tax breaks.

Obama’s proposal

The 2010 budget proposal that Obama has laid out calls for a 28 percent limit on the value of the tax break for itemized deductions. So, for every dollar donated to charity, people who make more than $250,000 would save 28 cents on their taxes.

Currently, the rate people save on itemized deductions is about 20 percent higher than the proposed cap. So the wealthiest people can save 48 percent on itemized deductions.

Bringing in big money

The cap on itemized deductions would raise $318 billion. That would get the president about halfway to his $634 billion health  care goal, which is aimed at making health care more affordable and available to everyone in the United States.

The itemized deduction cap would also apply to deductions for mortgage interest.

Charities worry about funding

Independent Sector, a coalition of charities and foundations, and the Council on Foundations  have said they are worried that they will get less funding as a result of the limit on tax breaks. A study from Indiana University says it’s possible that billion of dollars in charitable giving are at stake. Others say the effects of the change could be limited as far as charity donations go.

Two points of view

Washington lawyer Sheldon Steinbach says the proposal could hurt many groups, including the colleges and universities he represents.

“Any disincentive to charitable giving, especially in the current economic climate, will have an impact far beyond the black letter law. It will have an exponentially negative impact,” Steinbach says.

However, Stanford University associate professor Rob Reich says even if there is a decrease in charitable giving, the new health care system will be worth it. In a way it will balance things out.

“Is the good that will be done through health-care reform greater than the good that would have been done with the charitable projects of the wealthy people?” he says.

The great divide

Reich also points out that the charitable deduction favors the rich and is unfair to the poor. People with incomes too small to itemize get less of a break because they are in a lower tax bracket.

Obama believes the deduction cap is an important step toward a goal that will benefit the country as a whole.

“With this budget, we are making a historic commitment to comprehensive health-care reform. It’s a step that will not only make families healthier and companies more competitive, but over the long term it will also help us bring down our deficit,” Obama said.

Obama faces opposition from Senate Democrats

President-elect Barack Obama unveiled his massive economic stimulus plan yesterday, and most of the resistance to the package seems to be coming from inside the Democratic party. In a closed-door meeting with Obama aides David Axelrod and Lawrence Summers, democratic leaders expressed reservations about proposed tax cuts for businesses and individuals.

Quite frankly, because of the economy, if someone gives you a tax break you’re probably saving that money. You are going to salt that away, you are not going to spend it,” said Senate Agriculture Chairman Tom Harkin.

Iowa Senator Tom Harkin

Harkin spoke to reporters after the meeting, and he said he thought the plan relied too much on the “trickle down” theory, reports the National Journal.

Party priorities

Democratic leaders are saying more emphasis needs to be placed on other parts of the plans, specifically investing in energy and infrastructure. Obama’s proposal includes plans to create jobs in developing alternative energy and repairing the nation’s roads and bridges.

Harkin said many people at the meeting expressed the sentiment that the most important step toward fixing the economy is creating jobs. Budget Chairman Kent Conrad said energy is “way underrepresented” in the plan.

Stimulus check vs. tax break

The plan would give individual Americans $500 over a period of months through decreased tax withholding. For some, this could make the difference in whether they need a payday loan. Tax cuts would also be given to businesses who hire new workers. After the Bush administration sent out stimulus checks last year, it had no noticeable effect on the economy. So many Democrats believe a tax break would be ineffective as well.

However, Majority Whip Richard Durbin disagreed. He believes that Americans save the  money from their stimulus checks “because it’s the only thing coming.” He argues that if a small but steady stream of extra cash were predictable, people would consider making purchases they otherwise would not.

More voices chime in

Economists are calling on Congress to act quickly to pass the American Recovery and Reinvestment Plan, but they are split on support for the tax cuts. Some support the breaks and believe they will stimulate the economy, but others are skeptical that it will encourage more spending.

The U.S. Chamber of Commerce responded positively to the plan. Chamber President and CEO Tom Donohue expressed a rare sentiment when he called the package a relatively “cheap investment.” The price tag for the plan is estimated at $800 billion.

Editing process

Summers, Obama’s economic council director, was noncommittal about what changes would be made to the plan. Leaders involved in passing the huge initiative expect to see a lot of back-and-forth before an agreement is reached.

Republicans yesterday expressed general agreement with the plan. Some are encouraging that the proposed grant to supplement state revenue should instead be loans.

Check back with your payday loan source for more updates on the progress of Obama’s proposed stimulus plan.