Many in the philanthropic community say President Obama’s budget proposal, which would cap the tax deduction for donations and heavily depend on more tax revenue from the wealthy, would have a devastating effect on a charitable sector still recovering from the effects of the Great Recession.

Obama’s fiscal 2014 budget proposal resurrects his plan to limit the amount of the deduction for donations to nonprofits at 28 percent, regardless of a taxpayer’s bracket. So those in the top bracket of 39.6 percent, who get a $3,960 reduction in their tax bill for every $10,000 in donations under current tax law, would instead get only a $2,800 break.

This could provide an additional disincentive to donate for those in the highest tax brackets, who are also going to have to pay more in income, capital gains and a Medicare surcharge on investment income due to the enactment of the American Taxpayer Relief Act on January 2, according to officials in the philanthropic community.

“Our estimates are the affect could be pretty significant,” said Joanne Florino, senior vice president for public policy at The Philanthropy Roundtable. “It could be as much as $5.6 billion to $6 billion … That’s the entire budget of some large organizations. Think of the impact on smaller communities.”

Officials also worry that the imposition of the so-called Buffett Rule, also part of Obama’s budget proposal, could impact giving. The Fair Share Tax provision would require those with annual incomes starting at $1 million to pay a minimum tax, phased in to 30 percent. While the charitable deduction would remain—as virtually the only deduction for millionaires—it would be capped at 28 percent, 2 percent less than the tax rate.

Geoffrey Plague, vice president of public policy at Independent Sector, a coalition of about 600 charities, said one study found that the top 2.2 percent of taxpayers were responsible for 27 percent of all charitable giving.

“The reality is taxpayers in the higher brackets are responsible for a tremendous amount of giving,” he said.

A decline in giving would reverse the small increases of the last two years, as the recovering economy has prompted people to open their wallets a little wider after cutting back during the recession. Giving USA 2012 counted $298 billion in total giving in 2011, a 4-percent increase over the prior year. But the total amount of donations in the U.S. was still 11 percent below 2007 levels.

“Overall, the sector’s revenues have been stagnant,” Plague said. “This is the wrong time to consider proposals that will have a negative effect on giving.”

The result, officials in philanthropic organizations say, would not hurt taxpayers as much as it would hurt the nation’s needy, who benefit from charitable work.

“This is an area that is sensitive to discretionary income,” Florino said. “There is real concern. No one charitable sector is saying there will be no impact.”