Possible Changes in Charitable Tax Deductions Threatens Charitable Giving

by Gordon Haas

Charitable giving is a time-honored American tradition that strengthens communities and sets the standard for the rest of the world. From healing and educating to feeding the hungry and providing relief in times of crisis, the charitable sector is inextricably linked to our communities.

Philanthropy’s independent role as an investor in innovation and safety net services is more imperative than ever for restoring and sustaining a strong economy. However, Congress is seriously considering whether to retain, modify, or eliminate the charitable tax deduction, a 100-year-old tradition that encourages people to donate a portion of their income to support worthy causes.

Such a move would have a profound effect on giving that supports vital community services. It would hit those who need help the most. If donors have less incentive to give to charities, donations will decline, significantly impeding the important work that nonprofits do for the millions of people who rely on them.

America’s Nonprofits — Vital to Thriving Communities

·         Nonprofits generate $1.1 trillion every year in the form of jobs and services and account for more than 5 percent of the GDP.

·         1 in 10 U.S. workers are employed by the nonprofit sector, which provides 13.7 million jobs. Employees of nonprofit organizations received roughly 9 percent of wages paid in the U.S., and the nonprofit sector paid $587.7 billion in wages and benefits.

·         Charitable giving has a more significant economic impact in America’s communities than previously understood. New research reveals the “ripple effect” of foundation grant making supports millions of jobs and billions of dollars in economic growth that extends for generations.

The Power of Charitable Giving

The important work of nonprofits is supported in large part by generous donors and is an essential part of America’s economy and quality of life. The sector is incredibly diverse, supporting efforts such as:

·         Technology and medications to improve our health, including insulin and the polio vaccine, and the MRI, electron microscope, and pacemaker.

·         Educational opportunities and access to health services.

·         Housing and shelter for the most vulnerable.

·         Arts and cultural activities.

·         Protection of the environment.

·         Civil and voting rights.

·         Preservation of historic treasures.

The Charitable Deduction Is Unique

Unlike other tax incentives, the charitable deduction is a unique provision that encourages individuals to give away a portion of their income without getting anything back.

·         In 2011, Americans gave nearly $300 billion to support charitable causes, much of which is claimed as a charitable tax deduction. Individual contributions to charitable causes account for 73 percent of all charitable giving in America.

·         For every $1 a donor can deduct, the public receives approximately $3 of benefit. No other tax provision generates that kind of positive public impact.

·         The charitable deduction is used by people of varying income levels. The percent of people indicating they use the charitable deduction is the same for households with incomes between $50,000-$100,000; $100,000-$150,000; and $150,000+.

·         If Congress takes away the deduction, we put at risk billions in private donations that have supported diverse, worthy causes. For example, if the Administration’s proposed 28 percent cap on the charitable deduction is imposed, the sector could lose up to $5.6 billion per year. That is the equivalent of more than the annual operating budgets of Red Cross, Goodwill, the YMCA, Habitat for Humanity, the Boys and Girls Clubs, Catholic Charities, and the American Cancer Society combined.

Americans Understand the Value of the Charitable Deduction

Research shows there is strong and growing support for America’s tradition of giving.

According to the United Way:

·         79 percent believe reducing or eliminating the charitable tax deduction would have a negative impact on charities and the people they serve.

·         62 percent indicate they would have to reduce their contributions by a significant amount — by 25 percent or more.

·         Two out of every three Americans (67 percent) are opposed to reducing the charitable tax deduction.

As June approaches and budget season begins at both the federal and state level, the CRC will continue to work closely with the Jewish Federations of North America Washington office and our New Jersey State Association to oppose any changes to the charitable tax deduction and instead urge policy makers to help build the capacity of nonprofits.

 

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