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.
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.