State Tax Deduction Policies Affect Charitable Giving

A recent article in Stateline examines the impact charitable deduction policies at the state level have on the local charities that rely on giving to support their missions. In “Charitable Giving Tied to State Tax Deduction Decisions,” Elaine S. Povich highlights the direct effect state tax incentives have on donations, especially those from high-income donors. Of particular note is the 2011 Michigan tax overhaul, which eliminated deductions for charitable giving. Nonprofit advocates there have seen a devastating drop in donations – an estimated $50 million loss that threatens vital community services. Hawaii capped deductions in 2011 in the hopes of closing budget gaps with the tax revenue, but overturned the decision after the data illustrated a burdensome cost to communities. Tim Delaney, president and CEO of the National Council of Nonprofits, explains, “For every dollar the state was bringing in, it was losing five dollars in donations. It’s very difficult for elected officials to say, ‘oops I goofed.’ They had the political courage to come out and say we really blew it.” Read the full article here.