Struggling Economy Demands Strong Philanthropic Sector
WASHINGTON, D.C. – In tough economic times, the work of charities is more critical than ever and any incentives to encourage giving should not be cut, says a group of philanthropic and nonprofit leaders urging elected officials to preserve the charitable tax deduction. This year, political leaders in Washington, D.C. are putting deficit reduction at the top of the legislative agenda and tax incentives that support charitable giving in America are threatened like never before.
The Charitable Giving Coalition today called on presidential candidates Governor Mitt Romney and President Barack Obama to protect much-needed donations for charitable gifts. Both presidential candidates have offered proposals to cut tax deductions for such gifts.
“Any proposed cap would have long-lasting negative consequences on the charitable organizations upon which millions of Americans rely for vital programs and services,” the coalition said in letters to Romney and Obama.
President Obama would limit the federal tax charitable deduction to 28 percent for individuals earning more than $200,000 and families earning more than $250,000. Currently, they may claim up to a 35 percent charitable deduction. Governor Romney has proposed potential caps on itemized deductions of $17,000, $25,000 and $50,000. The coalition is a group of more than 40 charitable organizations, nonprofits and associations pushing for common-sense tax policies that recognize the critical role philanthropy and nonprofits play in restoring America’s economic and civic health.
Philanthropy has long invested in innovative efforts and nonprofits that create jobs, improve education and health care, protect the environment and aid the most vulnerable. The coalition says that now is not the time to dismantle a century-old tradition of charitable giving in America, particularly when there is increased demand for the kinds of programs and services nonprofits provide. According to the Nonprofit Finance Fund, 85 percent of nonprofits experienced higher demand for their services in 2011 and at least 70 percent have seen increased demand since 2008.
In 2011, individuals gave nearly $300 billion to support charitable causes, according to Giving USA. Much of that giving is claimed as a charitable deduction by millions of taxpayers each year, meaning they are not subjected to federal income taxes on money they give away to charities. Any caps or limits on charitable giving will have a devastating impact on charities and nonprofits. If donors have less incentive to give to charities – donations will decline, impeding the important work nonprofits do for the millions of Americans who rely on them. For example, up to $5.6 billion in charitable giving would be lost each year if the president’s proposal to cut the charitable deduction were enacted.
“The charitable deduction is different than other itemized deductions in that it encourages individuals to give a portion of their income to support worthwhile causes,” the letters said. “It rewards a selfless act, and it encourages taxpayers to give more funds to charities than they would otherwise have given. Data suggests that for every dollar a donor gets in tax relief for his or her donation, the public typically receives three dollars of benefit. No other tax provision generates that kind of positive public impact.”
What’s at stake:
- Nonprofits generate $1.1 trillion every year in the form of jobs and services.
- 1 in 10 Americans work for a nonprofit, providing 13.5 million jobs.
- Nonprofits account for 5.4 percent of the Gross Domestic Product and 9 percent of all wages paid, generating $668 billion in wages and benefits to its employees.
- The sector is incredibly diverse –supporting research and other efforts to:
-
- Develop medications like insulin and the polio vaccine
- Provide educational opportunities
- Develop technologies like the MRI, electron microscope and pacemaker
- Ensure housing and shelter for the most vulnerable
- Provide access to the arts and cultural activities
“People give to worthwhile causes for many reasons—incentives such as tax deductions being among them,” the letters continued. “Tax incentives make more and larger gifts possible. The federal government has acknowledged this trend. During times of crisis, such as the natural disasters like Hurricane Katrina, the 2008 Midwest flooding and the 2010 Haiti earthquake, Congress regularly passes charitable giving incentives to make it easier for Americans to give donations and support to nonprofits serving individuals, families and communities in need.”
Representing private and community foundations, their grantees and independent charities, the Charitable Giving Coalition’s members include the United Way Worldwide, the Salvation Army, Catholic Charities USA, the American Council on Education, the American Institute for Cancer Research, the Association of Fundraising Professionals, Independent Sector and The Philanthropy Roundtable, among others.
On December 4-5, hundreds of the coalition’s members from throughout the country will gather in Washington, D.C. for “Protect Giving-D.C. Days.” Participants will meet with members of Congress and their staffs to encourage them to preserve the charitable deduction, sustain local nonprofits and other worthy causes, and help them understand the potential impact that a decline in private giving would have on local programs and the people they serve.