Archive for February, 2011

February 23, 2011

What Can Fundraising Professionals Learn from L.L. Bean?

I recently had a personal experience that illustrates what I mean when I speak of “donor-centered” fundraising. Sadly, my recent experience is a cautionary tale rather than a happy story.

My experience brought to mind the L.L. Bean Company philosophy as described by Jay Conrad Levinson in his book Guerilla Marketing Excellence (Houghton Mifflin Company, 1993). Unfortunately, my recent encounter demonstrated the exact opposite point of view. At L.L. Bean, the successful retailer, the customer is the center of the universe. One way the company has maintained its customer-first culture is that it has developed a list of statements about customers that are shared with each employee as a reminder. In my own book, Donor-Centered Planned Gift Marketing (John Wiley and Sons, 2011), I adapted the L.L. Bean list for the nonprofit world because it is a good idea to remind ourselves and our colleagues, from time to time, of the importance of the donor:

  • The donor is the most important person ever in this office, in person, by mail, or on the telephone.
  • The donor is not dependent on us; we are dependent on the donor.
  • A donor is not an interruption of our work; she is the purpose of it.
  • We are not doing a favor by serving her; she is doing us a favor by giving us the opportunity to do so.
  • A donor is not someone to argue or match wits with. Nobody ever won an argument with a donor.
  • A donor is a person who brings us his wants. It is our job to handle them in a way that is beneficial to him and our organization.

Unfortunately, my recent experience involves an organization that is not donor-centered. A couple of weeks ago, I returned to my alma mater to be interviewed by National Public Radio. NPR did the interview remotely while I was in a studio at my old college radio station. It was fun to be interviewed by NPR even though I knew there was a superb chance I’d end up on whatever the digital version of the editing room floor is which, by the way, is exactly what happened. But, I was also excited to be back on my old stomping grounds. While just a 15 minute cab ride away from my home and office, I don’t get to that part of the city very often. And, I was particularly happy to be returning to the radio station, now in a far more sophisticated facility than when I worked for it in my student days.

My interview went quickly and well. So, with the extra time I had, I thought I would try to meet someone on the development staff, get a quick tour of the station, and become a “member” as a gesture of appreciation for them hosting me. Upon my request, the receptionist found a membership staff person to come out and speak with me. So far, so good.

I explained that I was an alumnus. I had been at the station to be interviewed by NPR. I found it exciting to be back since I had once worked long hours at the station’s old location while a student. And, I was interested in a quick tour. The membership person told me, with an officious tone, that I could not have a tour. When I expressed puzzlement over this, she further coldly explained that tours were available at set times and that I was welcome to come back at any of the designated tour dates and times. I shared that I don’t get to this particular neighborhood very often and, since I’m already present, would like just a quick peek around. She then began to get belligerent. She stated, “We can’t have people just showing up wanting tours!” I re-explained that I was not just anyone, that I was an alumnus and someone who had worked at the station. She said I’d still have to come back. I pointed out, with some annoyance, that this is not a very donor-centered approach. That simply confused her. So, I told her that doing things on my schedule is donor-centered while doing things on her schedule is organization-centered. At that point, she really looked like a deer caught in the headlights.

I waved-off the membership person. I thanked her for her time. And, I said good-bye. As I was putting on my coat, the station manager came out to greet me. The membership person had very wisely and very quickly briefed him. While I’d like to believe she did this for my benefit, I suspect it was really more about protecting herself from what she rightly expected would be a future complaint letter from me.

The station manager graciously apologized. He said staff was very busy as they were in the middle of the pledge drive and, therefore, could not be flexible regarding the tour policy. It was a case of bad timing. And, he, too, suggested I come back for a scheduled tour. We parted ways with handshakes and smiles. A couple of weeks have now passed, and I have yet to receive a “Gee, it was nice meeting you” email or letter. Nor, have I received a personal note inviting me back for a tour. In short, I have heard nothing more.

While I appreciate the station manager’s apology and understand his reasoning, he could have handled the situation much better.  Here are just some ideas for how he could have done things in a more donor-centered way:

  1. He could have explained to me that staff was busy with the pledge drive, but he’d have someone give me a quick walk around rather than a full tour. Surely someone could have been spared for five minutes of spontaneous donor cultivation.
  2. He could have invited me into the studio to observe the pledge drive.
  3. He could have invited me to become a member and then offer to put me on the air to do a short testimonial as a returning alumnus. That would have wowed me and a testimonial is a great way to inspire others to give as well.
  4. He could have followed up with an email or letter inviting me back or at least saying it was nice to meet me.

If he had done any of those four donor-centered things, I would have given the station money and become a member. And, I’d be on my way to being cultivated to give another, larger gift. Instead, that station manager and membership person have alienated me. I have not given and likely will not give for two reasons: First, I don’t like the way I was personally treated. Second, and far more importantly, if this is the way in which they treat prospective donors, they are alienating others and leaving plenty of other donations on the table. They have demonstrated that they are not a donor-centered organization.

If the radio station adopts a donor-centered development culture and if staff posts the modified L.L. Bean list somewhere on the wall of the development and membership office, I might be persuaded to make a gift to the radio station. Otherwise, I’ll continue giving where I know that organizations are most effectively raising and spending money.

Is your organization donor-centered? I hope so.

That’s what Michael Rosen says… What do you say?

UPDATE:

I’m happy to report that I received a gracious and thoughtful email from the radio station manager on March 2. He invited me to the station for a tour and a chance to talk. We’re in the process of coordinating calendars. I really do have fond memories of the station, and my wife and I are listeners. So, I’m looking forward to another visit and the chance to get the relationship back on track.

February 16, 2011

5 Reasons to Consistently Do the Right Thing

Most of us are good people trying to go through life doing the right thing. Admittedly, some of us have more success than others in this area. However, why should those of us who work for or volunteer with nonprofit organizations make some extra effort to consistently do the right thing? Here are just five reasons:

1. You should consistently do the right thing because it’s simply the right thing to do.

My parents used to tell me that doing the right thing is its own reward. They were correct. Unless you’re a sociopath, you will find yourself happier, with less stress, and a more restful slumber if you consistently choose right over wrong. If you believe in Karma, you know that doing the right thing will come back to benefit you. If you believe in Judaism, Christianity, Islam or any number of other religions, you know that God will reward the righteous. Nevertheless, consistently doing right is not always easy. So, here are four additional reasons why you should always make the effort:

2. People are more likely to donate if they trust you and the nonprofit organization you work for.

A study conducted by researchers at the Henley Management College in the United Kingdom found that “there would appear to be a relationship between trust and a propensity to donate” (Sargeant and Lee, 2002). Non-donors place significantly less trust in charities than do donors. That’s likely one major reason why non-donors are, well, non-donors. If nonprofit organizations are to attract new supporters, they will need to develop methods to build public trust. One way to build public trust is to be seen as consistently making good decisions. When organizations and the people who work for them are perceived of as consistently doing right, public confidence will grow.

3. People will not only be more likely to give, they will give more if they highly trust nonprofit organizations and the people who work for them.

“It would … appear that where donors believe that the management of a particular organization exercises good judgment, higher levels of trust may result” (Sargeant and Lee, 2002). “There is some indication here that a relationship does exist between trust and amount donated, comparatively little increases in the former having a marked impact on the latter” (Sargeant and Lee, 2002). So, trust impacts both propensity for giving and the amount given. According to a report issued by Independent Sector, a United States based coalition of over 700 major nonprofit organizations, foundations and corporations, “…those who have a high confidence in charities as well as believe in their honesty and ethics give an average annual contribution of about $1800. This is about 50 percent greater than the amount given by those sharing neither opinion, who average just over $1200 in annual household contributions to charity, once again underscoring the strong connection between public trust and giving” (Toppe and Kirsch, 2002).

4. If public confidence in a charity or nonprofit organizations in general is allowed to erode, giving will suffer.

When trust is compromised, fundraising efforts can be negatively impacted even if the mistrust is unjustified. For example, in Scotland in May 2003, The Sunday Mail newspaper published a report highly critical of the professional fundraising company Solutions RMC and its work for a breast cancer research charity. The controversy had an impact throughout the charity sector in Scotland, even impacting charities that never worked with Solutions RMC. Some cancer charities saw a downturn in contributions as high as 30 percent in the months following the controversy. By year-end, as public trust began to recover, so did giving (Watt, 2004. Lecture delivered at the AFP International Conference). Simply put, when the public has less confidence and trust in individual charities or the sector as a whole, they give less; when confidence and trust increase, so does giving. So, we each have a responsibility to both the organizations we work for as well as the sector at large.

5. “Always do right. This will gratify some people and astonish the rest.” — Mark Twain

Have some fun. Consistently do the right thing and surprise a great number of people! Along the way, you will enjoy greater personal satisfaction, greater success as you secure more donors and larger gifts for your organization, and enhanced career development as you are seen as a successful professional of great integrity.

Individually and collectively, nonprofit organizations can do many things to build public trust. In particular, nonprofit organizations must work to demonstrate to donors that the funds donated will get through to and have a positive impact on those receiving service from the charity. Individuals also want nonprofits to communicate more effectively and to solicit with less pressure; in other words, adopt a donor-centered approach. In short, organizations can enhance the public trust by maintaining the highest ethical standards and communicating this commitment to donors and prospective donors. One simple step in this direction is for organizations to adopt the Donor Bill of Rights as institutional policy.

That’s what Michael Rosen Says… What do you say?

February 10, 2011

Taxes Part 5: What Should the Nonprofit Sector Do?

This week, I’ve examined the following facets of the charitable giving tax deduction issue:

  • Taxes Part 1: What is the Federal Government up to?
  • Taxes Part 2: Proposals to eliminate or reduce the charitable giving deduction.
  • Taxes Part 3: Proposal to replace the charitable giving deduction with a tax credit.
  • Taxes Part 4: Why have a charitable gift tax deduction?

In this, my final post in the series, I want to explore what the nonprofit sector should do. Some have suggested to me privately that the sector should not be engaged in the debate. These folks suggest that our elected officials should legislate based on what is best for society and that special interest groups, including the nonprofit sector, should remain silent. I, for one, think that that way of thinking is simply nonsense.

U.S. Capitol

In a democratic society, citizens not only have a right to participate in the process of formulating government policy, we have a responsibility to do so. Furthermore, those who work in the nonprofit sector and/or with donors are closest to the philanthropic process. Therefore, we are in a unique position to help legislators understand the possible impact of various tax proposals. We can and must be a resource to our elected officials.

As a sector, we must fund the research necessary to inform the debate. We must fully understand the possible impact of the various proposals that have been made concerning the charitable giving tax deduction. We must understand the cost/benefit of each of the proposals to donors, to nonprofit organizations, and to the U.S. Treasury. And, we should be proactively looking for and recommending more meaningful charitable giving incentives that we might encourage the government to consider. With facts in hand, the sector should attempt to develop a consensus position and a strategy for advancing that position.

To some degree, what I have outlined is coming to pass. While the body of available research is incomplete and occasionally contradictory, it has helped us develop an understanding of how tax policy might impact philanthropy. The Center on Philanthropy at Indiana University is preparing a white paper on the subject which, when released in the near future, will further our understanding. Our professional associations and a number of major charities have already formed a coalition to represent tens of thousands of charities on this issue. Coalition members are already suggesting steps individuals can take to advocate for keeping the current charitable giving tax deduction system. I would respectfully request that the coalition also consider what giving incentives might work even better, both for the sector and society in general.

Finally, there are a number of things individuals can and should do. In order to be a good citizen, we must be informed. Therefore, I encourage everyone who works or volunteers for a nonprofit organization and/or who donates to one to be fully informed about the various proposals floating around Capitol Hill that could impact philanthropy, positively or negatively. Once well informed, I encourage you to join the discussion. Join the discussion here, at your organization’s board meetings, at your local professional association gatherings, on listserves, etc. I also encourage you to share your thoughts with your U.S. Representative and Senators — yes, even if you disagree with the coalition’s position.

The Association of Fundraising Professionals has put together an excellent resource page on its website which you can find by clicking here. The page includes links to proposal documents, a link to a terrific summary article from The Chronicle of Philanthropy, suggested talking points, and a sample letter to elected officials. I strongly encourage you to visit this useful resource.

Once legislation is actually introduced in Congress, I hope you will communicate with your Representative and Senators. I also hope you will encourage your donors to do likewise. It takes surprisingly few letters and phone calls to influence elected officials. And, when those letters and calls come from your donors who are also their donors, members of Congress will be even more likely to listen.

Finally, if you are a U.S. citizen and a member of AFP, I also encourage you to support the AFP Political Action Committee, the only PAC representing the nonprofit sector and promoting philanthropy. You can learn more by contacting AFP International Headquarters.

That’s what Michael Rosen Says… What do you say?

Update — Feb. 14, 2011:

As of this morning, we have a “new” proposal in the form of Pres. Obama’s FY2012 Budget. Unfortunately, a cap on itemized deductions (including charitable deductions) for high-income taxpayers was included in the budget to pay for an AMT fix. The Obama proposal is indeed the same as introduced over the past two years—a 28% cap for individuals earning more than $200,000 and couples/families earning more than $250,000.  Here is the language:

“…the value of certain tax expenditures.—

“The Administration proposes to limit the tax rate at which high-income taxpayers can take itemized deductions to a maximum of 28 percent, affecting only married taxpayers filing a joint return with income over $250,000 (at 2009 levels) and single taxpayers with income over $200,000.  The proposed limitation would be effective for taxable years beginning after December 31, 2011. As indicated in the discussion of adjustments to the BEA baseline earlier in this Chapter, the Administration proposes to offset the first three years’ cost of extending AMT relief with savings from this proposal.”

You can find this language on page 212 of the document (it’s .pdf page 44) of this link: <a href="http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/receipts.pdf.

Of course, this proposal is not the final word.  As the budget debate moves forward on Capitol Hill, anything can happen.  So, as a sector, we will need to remain vigilant.

Update — April 18, 2011:

A recent Gallup Poll reveals how Americans feel about the idea of eliminating the charitable giving tax deduction, and other deductions, to lower the overall federal income tax rate or to reduce the federal budget deficit.

For the charitable giving tax deduction, the poll found:

“…to lower the overall federal income tax rate…”  26% favor while 71% oppose eliminating the charitable giving tax deduction.

“…to reduce the federal budget deficit…”   29% favor while 68% oppose eliminating the charitable giving tax deduction.

Even among those who do not take advantage of the charitable giving deduction, the deduction has tremendous support.  35% favor eliminating the deduction while 62% oppose elimination even though they themselves have not claimed it.

You can find a complete summary of the survey results at the Gallup website: http://tinyurl.com/3gr4k93.

February 9, 2011

Taxes Part 4: Why Have a Charitable Giving Tax Deduction?

Total charitable giving in the U.S. in 2009 was $303.75 billion (2.1% of Gross Domestic Product), according to Giving USA 2010. Of that figure, $251.21 billion (83% of the total) came from individuals. Clearly, individuals are the backbone of American philanthropy.

Many in the nonprofit sector believe, backed by some research studies, that charitable giving remains strong in the US in part because of the incentives offered by the Federal Government. This is the primary reason why many in the sector support the charitable gift tax deduction. It also is why many are concerned that the government might adopt one of the proposals for either eliminating, reducing, or replacing the charitable gift tax deduction.

The consensus that has emerged among a group of large nonprofit organizations is that the Federal Government should preserve giving incentives. Last year, an alliance of 23 nonprofit organizations and professional associations representing tens of thousands of charities sent a letter to President Obama urging him to reject any change to the charitable gift deduction.

The primary reason the consortium backs the charitable giving tax deduction is because the members believe it works to stimulate individual philanthropy. Conversely, the members wrote, “Limiting the value of the charitable deduction does the exact opposite and would fundamentally alter the tradition of charitable giving that has made America one the most generous nations in the world.” For a complete copy of the letter to President Obama and a list of signatories, click here.

Another reason to have a charitable gift deduction is cultural. It is important to have the Federal Government state that charitable giving is such an important duty of citizenship that the government encourages it through the giving incentive. Removing the deduction would send the exact opposite message.

In Canada and the UK, when parliament has contemplated actions impacting the charitable sector, government has engaged the sector in dialogue and both sides have worked closely together to achieve results in society’s best interest. This has been less the case in the US where the relationship has often been adversarial, according to some participants in the process. If the nonprofit sector and the Federal Government can work in concert to arrive at solutions to our challenges, I’m confident that we’ll end up in a reasonably good place. On the other hand, things could get ugly for the sector and society as a whole.

That’s what Michael Rosen says… What do you say?

February 9, 2011

Taxes Part 3: Proposal to Replace the Charitable Gift Deduction with a Tax Credit

There are a number of proposals for modifying or eliminating the charitable gift deduction that are currently being considered on Capitol Hill. One option comes from the Bipartisan Policy Center’s Task Force. The proposal calls for replacing the charitable gift deduction with a tax credit plan modeled after the United Kingdom’s Gift Aid system.

Instead of a donor receiving a tax deduction for making a charitable donation, he or she would receive a tax credit. Discussions have included a credit up to 15% of the gift. However, instead of the donor receiving a direct benefit, it would be the qualifying charity that receives the benefit. Here’s how it would work: A donor makes a contribution of $100. Upon submitting the necessary paperwork, the Federal Government would send the charity a check for $15. If a donor wants the charity to only receive $100 or wants to lower the “cost” of making such a contribution, he or she could contribute $87 to the charity knowing the government would contribute an additional $13.05.

Unfortunately, such a system would require the Federal Government to build yet another bureaucracy to handle the processing. The cost to the government of additional staffing, equipment, and payment processing will not be insignificant. There would also be a cost burden placed on the nonprofit sector. Organizations would need to spend money educating donors and then monitoring and following up to make sure that donors file the proper paperwork and that the government processes that paperwork without error. This is all an unnecessary set of costs.

The other problem with such a system is that it would require a greater degree of action by donors. First, donors would need to calculate their giving combined with the government giving to figure out how much they’re really donating instead of simply writing a check for $100; under the tax credit system, the donor would have to determine whether they want to donate $100 themselves or just $87, for example. In addition, the donor would have to file some sort of paperwork, along with documentation, to prove to the government that a tax-credit grant should be made to the charity. Many donors are likely to skip this step or do it incorrectly.

Even a Task Force member suggested in The Chronicle of Philanthropy that there is risk. Leonard Burman, a professor at Syracuse University, admits that the possible impact is unclear and could reduce major donor giving, particularly for education and the arts. Yet, he still endorses this proposal which he says has been modeled after Gift Aid in the U.K.

So, what do the Brits have to say on the subject of this proposal? Roberta d’Eustachio, the Chief of Staff to the British Government’s Ambassador for Philanthropy said, “This is the worst idea I ever heard. While charities and nonprofits get money from the government, not everybody that could ‘take up’ the Gift Aid option, does. Why? Because they have to tick a box, they have to do something extra in the bureaucracy and people just don’t do it. … This is a disaster waiting to happen.”

The tax credit plan would be more costly than what we have now, more cumbersome, less donor friendly, and likely to result in less giving. The one thing this plan would effectively do is make folks, particularly charities, more beholden to the Federal Government. D’Eustachio says, “The charities can also begin to lobby for ‘more’ money as they have done here in Britain…. It’s $15 of the $100 today, tomorrow they will want more, and pretty soon the charities are having more of a relationship with government than they are with the donor.”

So, in its infinite wisdom, the Task Force is advancing a proposal modeled after the system in the U.K. that the British do not even endorse! That’s What Michael Rosen Says… What do you say?

February 8, 2011

Taxes Part 2: Proposals to Eliminate or Reduce the Charitable Gift Deduction

Various proposals are swirling around Capitol Hill to dramatically alter the tax code. A number of these proposals include a complete elimination or significant reduction of the charitable gift deduction. While no formal legislation has been introduced so far, Capitol Hill watchers fully anticipate such legislation sometime this year. Therefore, the nonprofit sector needs to get informed now and develop a strategy for advocating for the position it adopts.

There are two particular proposals that have received a fair amount of media coverage:

  1. Elimination of the charitable gift deduction along with virtually all other tax deductions.
  2. Effective reduction of the charitable gift deduction by allowing deductions for philanthropy in excess of 2% of gross adjusted income. The deduction would be available to all tax filers and, depending on the proposal, might be capped.

Would either of these proposals negatively impact philanthropy?

Some people assert there would not be a negative impact. These people cite research that reveals that most donors are not particularly motivated by tax avoidance. They also point out that philanthropy was alive and well in the U.S. long before there were charitable giving incentives or, for that matter, an income tax. These people also observe that, since records have been kept, charitable giving has always been about 2% of Gross Domestic Product (1.7% – 2.3%) regardless of the tax policies adopted by Congress.

By contrast, a Bank of America study conducted by the Center on Philanthropy at Indiana University found that 48.3% of wealthy Americans would reduce charitable giving if the gift deduction were eliminated. Of the wealthy American surveyed, 19% said they would dramatically reduce giving. For the survey, “wealthy Americans” were defined as those with an annual income of at least $200,000 and/or $1 million in non-residential assets.

While there are contradictory views on the subject and even research reports that appear contradictory, an anticipated university-drafted white paper is expected to find that philanthropy would be negatively impacted by elimination of or a significant reduction in the charitable gift deduction.

If people experience an increased tax burden, they will have less disposable income with which to make a current cash contribution. Elimination or reduction of various tax deductions would contribute to an increased tax burden for people. Therefore, individual philanthropy would be negatively impacted.

Some have suggested that such damage might occur but would only be short lived as the nonprofit sector would respond with enhanced fundraising efforts. But, such thinking is purely speculative. Between 2007 and 2009, individual giving (adjusted for inflation) has dropped 5.7%. Nonprofit organizations are already suffering and already scrambling for resources. The people who depend on the services provided by the nonprofit sector are already suffering. Do we really want to hurt more people, more severely just to light a possible fire under the feet of development professionals?

Elimination or reduction of the charitable giving tax deduction will negatively impact individual giving. This negative impact will be on top of the negative impact the sector will feel when the individual tax burden is increased. Nonprofit organizations, which provide vital services to our society, should not have to take the double hit.

That’s what Michael Rosen Says… What do you say?

February 7, 2011

Attack on the Charitable Gift Deduction, 5 Part Series

Last week, National Public Radio interviewed me for a report about the various proposals floating around Washington, DC concerning the charitable gift tax deduction. While no specific legislation to reform the tax system has been presented in Congress, Capitol Hill watchers expect major overhaul legislation to be introduced sometime this year. Normally, I’ll only blog once a week. However, this week I want to address the charitable gift deduction issue, and the subject is just too big for one post. So, I’ll be blogging throughout the week on the topic. I’ll address the issue in the following parts:

  • Taxes Part 1: What is the Federal Government up to?
  • Taxes Part 2: Proposals to eliminate or reduce the charitable gift deduction
  • Taxes Part 3: Proposal to replace the charitable gift deduction with a tax credit
  • Taxes Part 4: Why have a charitable gift tax deduction?
  • Taxes Part 5: What should the nonprofit sector do?

NPR Interview

Rosen interviewed by National Public Radio.

 

Taxes Part 1: What is the Federal Government up to?

The Obama Administration and members of Congress have been talking for months about the need to reform our tax system. President Obama appointed Erskine Bowles and Alan Simpson as co-chairs of the bipartisan National Commission on Fiscal Responsibility and Reform. The Bipartisan Policy Center’s Debt Reduction Task Force, co-chaired by Pete Domenici and Alice Rivlin, is a nonprofit organization that has also put forth its own recommendations. Both groups are recommending drastic changes to or elimination of virtually every tax deduction including the one for charitable giving. So, what are they up to?

The U.S. Federal Government has long been guilty of runaway spending. As of Feb. 2011, the national debt is over $14 trillion! Finally, the Federal government seems to understand that the country cannot keep piling on more debt. There are only two ways to address the debt situation: 1) Cut spending, and 2) Raise more tax revenue. The reality is that solving the debt problem will probably require both spending cuts and tax increases. To date, Congress seems to be avoiding major budget slashing and, at best, is simply nibbling at expenses. So, it’s not a surprise Congress and the Administration are looking at a major tax hike. However, they’ll never come out and admit that because it would be too politically costly to do so.

At least one of the tax overhaul proposals would drastically reduce tax rates. Rates would be reduced to 8% to 23% versus today’s range of 10% to 35%. That sounds great, doesn’t it? However, while it sounds like a proposal to lower taxes, it would really result in most people paying more taxes because of the corresponding proposal to eliminate or reduce tax deductions.

The tax overhaul proposals are an example of the Federal Government at its most insidious and cynical. Both Democrats and Republicans would like to raise tax revenue. I suspect they think it’s easier to raise taxes than cut spending. To get Democrats on board, elimination or reduction of tax deductions has been proposed. That would allow Democrats to tell their base of support that they have brought “fairness” to the tax code by reducing or eliminating deductions for the so-called “rich.” To get Republicans on board, the proposed overhaul involves a major reduction in tax rates. That would allow Republicans to tell their base that they have lowered tax rates. Both sides will do everything possible to avoid telling voters that they are really increasing their tax burden. Unfortunately, this is likely to be our future.

If taxes go up significantly, people will have less net income. Research shows that when people have less net income, they give less. So, regardless of which charitable deduction plan is adopted, if any, an increased tax burden will negatively impact philanthropy. Furthermore, a hefty tax increase would likely have a negative impact on Gross Domestic Product. So, even if philanthropy remains at about 2% of GDP, charitable giving will suffer as GDP growth remains sluggish or slides into negative territory.

Congress and the Administration are not likely to single out the nonprofit sector. Instead, the sector is likely to experience some collateral damage as Democrats and Republicans team-up to find crafty ways to increase taxes. That’s what Michael Rosen Says… What do you say?

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