Millions of America’s most vulnerable are the true beneficiaries of the charitable tax deduction, the Charitable Giving Coalition said today. Any limits on this 100-year old tax incentive would most hurt the poor and the nonprofit sector, not the donors who give. The Coalition is reminding lawmakers in Washington, D.C. of that fact as they consider comprehensive tax reform proposals.
New research from the Congressional Budget Office (CBO) regarding the impact of tax credits, exclusions and deductions emphasizes the benefit to the donor, which the Coalition views as a faulty premise. Rather, the analysis should focus on the collective benefits that charitable contributions bring to communities and citizens.
“Viewing it as a ‘tax break for the richest’ ignores the lifeline that nonprofit support services and jobs provide millions of Americans,” the Coalition said. “It’s not about the donor. It’s about what donors’ dollars do to aid the most vulnerable, educate, heal, nurture and innovate – often in ways that government and the private sector cannot.”
The Coalition adds that analysis like the CBO report glosses over the fact that a donor must make a donation to a charitable organization that is far greater than the amount of the tax deduction.
Studies indicate that billions in donations could be lost each year if lawmakers reduce the value of the deduction.
- According to one estimate, donations to the nonprofit sector could decline as much as $5.6 billion per year. That is more than the annual operating budgets of the American Red Cross; Goodwill Industries International, Inc.; Habitat for Humanity; the Boys & Girls Clubs of America; Catholic Charities USA; and the American Cancer Society – combined.
- According to a recent report released by the Center for Effective Government, the president’s proposal would reduce giving by up to $9.1 billion annually.
Michigan is already seeing how changes in tax policy can hurt charitable giving and vital nonprofit services. Earlier this year, the state enacted a set of new tax laws, including the removal of a tax credit for charitable contributions. Donations to many nonprofits are down significantly. According to the Council of Michigan Foundations, donations are down 28 percent overall for community foundations across the state and the decline is expected to be worse in the wake of the new law.
According to United Way Worldwide, nearly two-thirds (62 percent) of Americans would curtail their giving significantly—by 25 percent or more—if the charitable deduction is capped or limited. The United Way also says that a 2.5 percent reduction in donations would mean 1.3 million fewer times the organization can provide job training services to an unemployed worker, home care for an elderly citizen, housing support for a single mother or a mentor or a tutor for an at-risk youngster.
“For every $1 a donor can claim for his or her donation, the public receives approximately $3 of benefit,” the Coalition said. “What other incentives provide such a high return on investment? Millions of people will be put in harm’s way if lawmakers tamper with the charitable deduction. Given the tremendous needs in our communities, we simply can’t afford to weaken a 100-year-old tradition that encourages giving. The nonprofit infrastructure is a robust and stable source of jobs, services and support. At a time of economic uncertainty, it is imperative that we support, not weaken this vital sector.”
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The Charitable Giving Coalition
Representing private and community foundations, their grantees and independent charities, the Charitable Giving Coalition’s members include United Way Worldwide, the Salvation Army, Catholic Charities USA, the American Institute for Cancer Research, the Association of Fundraising Professionals, Independent Sector, the Council on Foundations, The Philanthropy Roundtable, among others. Formed in 2009, the coalition is a broad cross-section of nonprofit organizations across the country, including both the nonprofit organizations themselves and the associations and umbrella groups that serve their needs. The coalition is dedicated to preserving the charitable giving incentive that ensures that our nation’s charities receive the funds necessary to fulfill their essential philanthropic missions. The coalition provides a unique and unified voice on Capitol Hill on issues affecting the charitable deduction, a voice composed of both direct lobbying and robust grassroots advocacy. www.protectgiving.org