AndrewA Time to Act on Threats to the Charitable Deduction

By: Andrew Schulz In: Advocacy| Foundations On The Hill| Nonprofits

5 Oct 2011

After watching a high-stakes stalemate in Congress over the federal budget this summer, the philanthropic community is now preparing for a critical fight over the role of charitable giving in American society.

Since 2009, the Council on Foundations has fended off repeated efforts by the White House to cap the charitable deduction at 28 percent as a revenue raiser for proposed programs like health care reform, the Alternative Minimum Tax patch, deficit reduction, and most recently, a jobs bill. Next year, we face the prospect of the deduction being on the table again for a congressional discussion of tax reform.

President Obama’s fiscal 2012 budget calls for taxing families on money that they gave to charity by limiting the value of itemized charitable deductions at 28 percent for individuals with incomes above $200,000 and joint filers with incomes above $250,000. This cap could have a devastating effect on charitable giving-perhaps billions of dollars annually by some estimates-by taking money out of the hands of charities and putting it into government coffers.   

Cutting money from the nonprofit sector also undercuts job growth. Nonprofits were directly responsible for 12.9 million jobs in 2005, approximately 9.7 percent of the country’s workforce and 8 percent of America’s wages. Indirectly, they fund job training programs, help people find and apply for jobs, invest in economic development, pay for education, and run countless other programs that help people find and get jobs. Unlike corporate profits that go to shareholders and investors, every penny nonprofits raise goes to running programs and paying their employees.

Charity is not a loophole for the rich. It is not a tool that millionaires and billionaires use to avoid paying their “fair share.” The charitable sector is essential to the fabric and the success of our society. It is the work of independent citizens coming together to solve their community’s most pressing problems- relying on one another rather than the government.  Today, and for the past 40 years, charitable giving has stayed flat at roughly 2 percent of GDP.  What our country really needs is more charitable giving, not less.

This is why the Council has issued a call to action for its members and the greater philanthropic community to reach out to lawmakers to ensure that we encourage, not diminish, philanthropy at a fragile time in our national economy.  Please join the Council and your philanthropic colleagues in signing onto a letter to the supercommittee so we can be sure they know how you feel about this critical issue.  

In an economy where many local and state governments lack resources, nonprofits and the foundations that support them are often able to innovate in ways that bureaucracies cannot. While philanthropy cannot replace the scope of government programs, it can point the way to new directions at a time when the entire nation is looking for answers to our social and economic problems.  But we can only seek these answers if charities have the resources that the current charitable deduction helps provide.

The Council will continue to do its work diligently here in Washington, D.C., to oppose tax policies that threaten charitable giving, but we need the entire philanthropic community’s voice to be heard.

Andrew Schulz is vice president of legal and government relations at the Council on Foundations.

1 Response to A Time to Act on Threats to the Charitable Deduction

Eileen Ellsworth

October 6th, 2011 at 1:55 pm

We know that tight budgets are causing local and state governments to significantly cut their investments in nonprofits, including those providing human services and basic needs assistance services. The philanthropic/nonprofit sector is quickly and surely becoming the safety net of last resort. If the charitable tax deduction is on the chopping block despite this funding pressure, then the sector as a whole is failing to communicate its core value to the Obama Administration and to Congress.

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