Special Report: Hillary Clinton Wants to Limit Charitable Deduction, Could Cost Charities Billions

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Hillary Clinton, the current frontrunner for the Democratic Party nomination for President of the USA, put forward a plan that could cost the nonprofit sector billions of dollars in voluntary donations.

Hillary Clinton

Hillary Clinton

Like President Barack Obama, Clinton announced that she would seek to impose a cap on tax deductions, including the deduction for charitable giving.

On the campaign trail, Clinton proposed the “new college compact.” At a town hall meeting in New Hampshire on Monday, August 10, Clinton announced a plan to reduce the cost of four-year public schools, make two-year community colleges tuition-free, and cut student loan interest rates.

To pay for the $350 billion plan, Clinton would seek to impose the same 28 percent cap on itemized deductions that we have seen in Obama’s proposed budgets. Charitable deductions are not exempt from this plan. Currently, taxpayers may claim up to a 35 percent charitable deduction.

When Obama proposed a similar tax policy, the Charitable Giving Coalition issued the following statement:

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.”

Like the Obama plan, the Clinton proposal would also negatively affect charitable giving. Nevertheless, “Clinton aides believe their plan will help build enthusiasm for her candidacy with younger voters,” according to an Associated Press report.

The cynical effort of the Clinton campaign to buy the youth vote reminds me of two quotes from Alexis de Tocqueville, the 19th century philosopher and historian:

The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.”

“Democracy extends the sphere of individual freedom, socialism restricts it. Democracy attaches all possible value to each man; socialism makes each man a mere agent, a mere number. Democracy and socialism have nothing in common but one word: equality. But notice the difference: while democracy seeks equality in liberty, socialism seeks equality in restraint and servitude.”

I’m also reminded of a quote from author P. J. O’Rourke that appeared in Age and Guile Beat Youth, Innocence, and a Bad Haircut:

It’s not an endlessly expanding list of rights — the ‘right’ to education, the ‘right’ to health care, the ‘right’ to food and housing. That’s not freedom, that’s dependency.”

What we need in this country are incentives and programs that encourage more support for charities, not less. A more robust nonprofit sector, rather than a more controlling Federal government, is one key to preserving our democracy.

The Association of Fundraising Professionals and the Charitable Giving Coalition are in the process of developing a formal response to the Clinton proposal.

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


UPDATE (August 11, 2015): The Association of Fundraising Professionals has released its official response to Hillary Clinton’s proposal. You can download the statement by clicking: Clinton Tuition Plan Reaction August 2015 FINAL.

UPDATE (March 3, 2016): Hillary Clinton’s recently released tax plan would expressly EXEMPT the charitable deduction from a proposed 28 percent cap on itemized deductions (which is otherwise the same as President Obama’s 28 percent cap). This new development is extremely good news from a policy standpoint, as this is the first time that we’ve seen the charitable deduction exempted from the cap. It is worth noting that this is a positive change from Clinton’s previously released tuition plan that applied the 28 percent cap without exempting the charitable deduction.

11 Responses to “Special Report: Hillary Clinton Wants to Limit Charitable Deduction, Could Cost Charities Billions”

  1. Sec. Clinton’s latest ploy to further subsidize the higher education sector with $350 Billion of taxpayer money is sure to buy a few votes from clueless students and desperate parents. I propose something cheaper: wage and price controls on higher education. Freeze tuition for a period of up to 10 years, and freeze salaries of administrators and professors likewise. There will be a howl of protest, but after two decades of tuition rising at twice the overall rate of inflation, it’s only fair.

    • Steve, thank you for sharing your interesting idea.

      In 2013, I reported that Amy Gutmann, the President of the University of Pennsylvania, received a 43 percent pay increase. Her compensation was 12 times that received by the average Penn professor! It’s not that Penn professors are paid poorly; they rank seventh nationwide. After getting her big pay raise, Gutmann defended Penn’s tuition increases, citing the fact that “costs go up faster than tuition.” Yeah, I guess so when you give the President a 43 percent raise.

      Some reports indicate that increases in government spending on higher education do NOT slow increases in tuition. Higher education appears to be an insatiable beast. It may indeed be time for some form of regulation, particularly for those universities that receive taxpayer funds.

      Regardless of whether or not people agree with your idea or Clinton’s, the fact is that the Clinton plan will cost the nonprofit sector billions of dollars in voluntary donations. That’s something the public definitely needs to consider when evaluating the Clinton plan. There must be a way to keep college accessible without harming charities.

  2. I read your posts for fundraising advice not your political opinions and I urge you to stop making blatant political editorial comments like ‘ The cynical effort of the Clinton campaign to buy the youth vote” Otherwise, you will be losing readers, including me.

    • Catherine, thank you for sharing your opinion. While I appreciate hearing from you, I must respectfully disagree with your critique of my post. I have not expressed a political opinion. The fact is that Clinton campaign staff members told the Associated Press that the new college compact was designed to attract the youth vote: “‘Clinton aides believe their plan will help build enthusiasm for her candidacy with younger voters,’ according to an Associated Press report.” I suppose you and I could argue whether that move was cynical or savvy. But, you can’t argue that it was not the Clinton campaign that engaged in this issue for political reasons.

      The facts are what the facts are. The Clinton campaign has admitted that the new college compact was designed for political reasons. Furthermore, the plan would cost the nonprofit sector billions of dollars in voluntary donations every year. It is that latter point that my readers should find alarming.

      I will continue to use my blog to, among other things, alert my readers to the policy proposals that politicians put forth that will dramatically affect the nonprofit sector’s ability to raise voluntary donations. I will let my readers know of proposals that will make raising money easier or more difficult. If Clinton proposes a plan that will help increase charitable giving, I will report that. If a Republican candidate proposes a plan that would dramatically affect charitable giving, either for the good or bad, I will certainly report that.

      Yes, I have a bias. However, it is not a political bias. My bias is for what is best for voluntary philanthropy. I will continue to write with that bias in mind.

      Finally, I hope you find sufficient value from reading my blog to stay with me. I cover a broad range of issues, as you know. One thing you can always be assured of is that I will continue to do whatever I can to help nonprofit organizations be more successful at securing voluntary donations. And I will continue to oppose policies that will make raising voluntary donations more difficult.

      • Michael,

        Quoting an unnamed source is not the best, or necessarily accurate, way to support your point. Someone could also make the case that reducing student debt will help our economy so that the next generation can afford to donate to charities. Something to consider?

      • Catherine, your point is certainly one worth considering. Thank you for sharing it and pointing out the upside for the nonprofit sector. I would like to add that if the Clinton plan makes college more accessible, we’ll eventually have more college graduates. College graduates donate more money. So, in the long run, the Clinton plan could result in more philanthropy. However, in the meantime, it could be a very real problem for charities. The Association of Fundraising Professionals has released an official statement (above under “UPDATE”) predicting that the Clinton plan will cost charities about $80 billion in voluntary donations over a ten-year period. A loss of that amount of funding is bound to have an impact on the level of services that some charities will be able to provide. We can debate whether or not the sacrifices in the short-term are worthwhile as an investment in the long-term. What none of us should do is ignore the short-term pain that the nonprofit sector will likely feel.

  3. Like our current President, Ms. Clinton believes the government knows best how to use the taxpayers’ money, rather than let the donor choose who and how they wish to support the cause of their choice. Unfortunately, I think we have all seen the government make some poor choices in how they spend our tax money. I would rather choose how my money is used.

    • Richard, thank you for sharing your thoughts. I’m biased when it comes to the nonprofit sector. I strongly believe in voluntary philanthropy. I will continue to support efforts that promote voluntary philanthropy, and I will continue to oppose efforts that will dramatically decrease voluntary philanthropy. I really don’t care which candidate or political party is advancing a particular proposal. I’ll evaluate the proposals based on how they impact voluntary philanthropy. be it good or bad.

  4. I am 29 years old, and I worked my way through college watching college costs increase 1500% in the last 25-30 years. When college was subsidized from the 1970s to the 1990s many people got college degrees for free. Inflation and cost of living has skyrocketed since that time as well with bank bailouts, wars, subprime mortgage prices, and multiple recessions. I dropped out of school twice because I couldn’t work full time to earn a living wage while spending my nights going to school. I burnt out twice and failed to economically stabilize because I came from a poor family. Now, I found my partner in life, and she finished college and came from a middle class family so she can support me. Now, we’re swimming in debt together. Best of all, though, we live paycheck to paycheck. Funny enough, I am top of my class at UMASS Boston because we can at least make it with two people and I don’t have to work 80 hours a week with school. I couldn’t even make it before with the financial burden my generation faces. Social mobility is non-existent in the USA because of inflation, college costs, and terrible public policy. The World Bank recently released a report that said there is more social mobility in India than in the USA. If you’re born in poverty in the USA and India, you have a higher chance of getting out of poverty in India because of the economic situation currently in the USA.

    My generation has pretty much been sold out. I don’t know many people of my generation (I have lived in California, Texas, and Massachusetts) who own their own home and have gotten married, unless they came from a rich family. The only reason I haven’t gotten married is because I can’t afford a ring for my GF. I poured every cent I have into my education, and I still am leaving with $30k in debt (my GF came from a top 24 school, and she left with $100K in debt). Every single person graduating from college, coming from a lower middle class family, is drowning in debt and lives pretty much paycheck to paycheck. Personal responsibility aside the system is failing all of us. Income inequality is higher than it has been since the 1915s. Social unrest is a daily occurrence in the United States. Police brutality as well. Now, radical politicians (Trump Conservative and Sanders Socialist Liberal) are leading the polls from both sides of the political spectrum.

    This fix will help people attend college while dealing with the brutal realities that there is no social mobility in the USA. The poor stay poor in this country, and it’s getting worse as any 2nd level educational institution will tell you with data and statistics to back it up. I welcome this plan because I believe rich people will still donate. I consider rich people making $190,000 a year + because I can’t imagine having this much money and not being able to live comfortably. They still want to do their part to help society. If charitable tax deductions for the income bracket of $190,000 + is the SOLE REASON why people donate to charity then, without a doubt, trickle down economics doesn’t work. The IMF already came out and said it doesn’t work and the policies have led to income inequality at their current levels. So people donating to fix problems stemming from terrible public policies seem not to be the problem to fixing our current society in the USA.

    I am not a Democrat or Republican. I don’t like generalizations, but I look around at people my age born in poverty and see suffering. I am beginning to see hate and anger and massive violence. If these problems aren’t handled the USA will tear itself apart thanks to self-interest and lack of vision collectively.

    I voted yes on your pole, Michael, because this is a step in the right direction to fix the root of the problem, in my opinion. So many people are suffering and can’t get ahead because wages remain stagnant, growth is non-existent, while cost of living is sky rocketing every SINGLE year. My rent has increased in Boston every year for the last six 10% while my wages have increased maybe 0.10%. I have tried “pulling my self up from my bootstraps” in public service jobs like retail management where I would get .10 cents raises and perfect performance assessments. Encouraging people to donate more to nonprofits isn’t going to fix the root of the problem because the problem is public policy. At least this lobbied sellout senator looking to lead this plutocracy is going to try to help people struggling a little bit. Just my 2 cents, my man, but we come from different times and a completely different generations. I respect your opinions though. I thought I would share with you my struggle and one that represents the far majority of millennials. You run a good blog, my man. Only reason I felt like sharing my opinion.

    • Mitchell, thank you for taking the time to share your story. I hesitated posting your comment because I do not want to see the discussion here devolve into a policy conversation about higher education. I’d like to keep the focus on the impact the Clinton plan will have on charitable giving. However, I ultimately decided to post your comment because you took a significant amount of time to write it, and because your story demonstrates the complexity of the problem.

      Now, I’d like to respond.

      While the issue of runaway higher education costs and soaring student debt are serious problems, the Clinton plan is not the only possible solution. As we search for a viable solution, we must be sensitive to the Law of Unintended Consequences. We do not want to solve one problem by causing another.

      The Association of Fundraising Professionals has released a statement (above under “UPDATE”) that says that the Clinton plan would cost charities $80 billion in lost voluntary donations over a ten-year period. As Catherine Stevens has pointed out here, the long-term impact might be good for philanthropy. Nevertheless, there will very likely be a period of initial pain for the nonprofit sector.

      One might wish that wealthy philanthropists do not consider tax implications when giving, but they do. While tax considerations might not be the sole motivations, or even a major motivation, they do play a role. If they did not, we should do away with the charitable gift deduction all together.

      Now, I’d like to respond to you from a personal perspective. You and I are not so different. I grew up in a working class family that at one time had to turn to food stamps to make ends meet. I attended a state-related university that offered much lower tuition than a private university. I held a work-study job as well as a regular job to help pay my own way through. When I attended college, it was the beginning of government funding cutbacks and runaway tuition costs. I eventually dropped out of college before earning my degree, in part for economic reasons and in part because I got a job in my chosen field of journalism. I had to renegotiate my student loan so that I could avoid a default.

      Also, like you, I could not afford to buy my girlfriend an engagement ring. However, I still got engaged. I used the insignia ring my father used to get engaged to my mother; he couldn’t afford an engagement ring either.

      With hard work and an entrepreneurial spirit, I paid off my debts, built a business, and raised my standard of living. Eventually, I even bought my wife the diamond ring that I wish I could have given her years earlier.

      I’ve shared my story so that you will know that I truly understand yours. I also want you to understand what is possible.

      Finally, I want to respond to your comments about poverty and economic mobility in India. For the most part, we in the USA have no clue what true poverty looks like. According to the former Dean of the Temple University Fox School of Business, the average person living in poverty today in the USA has a standard of living comparable to the average middle class person immediately after World War II. For his analysis he looked at things such as life expectancy, number of cars owned, number of major appliances owned, education level, clothing owned, hours worked, etc. While there are certainly extremely poor people in the USA, most of those living in poverty here are far removed from the poverty in India. I dare say that the average person in poverty in India would love to be in poverty here.

      Incidentally, my mother grew up in deep poverty. For her family, that meant no hot water, no full private bathroom, few clothing outfits, no telephone, no air conditioning, only a potbelly stove for heat, limited healthcare, and no car. Today, most people living in poverty have a much higher standard of living than she did. We need to keep our perspective.

      As a matter of public policy, I would like to see higher education be more accessible. I think it would help address many of our nation’s economic woes. However, we should seek a solution that does not hurt the nonprofit sector. A $5 billion to $8 billion per year drop in voluntary contributions will negatively impact the services provided by some charities. People will suffer. We should seek solutions that do not harm our nation’s charities.


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