Viewpoints: Are feds set to pull rug from under charities?
Sacramento Bee (Opinion)
October 28, 2011
By Ruth Blank
For a region still struggling with some of the worst economic conditions on record – a region that, even before the economy tanked, lagged the rest of the nation in philanthropic giving – proposals by the Obama administration and the so-called supercommittee to decrease the deductibility of charitable gifts are a very bad idea. They could severely damage our communities and set a dangerous precedent.
A recently completed multi-county study of philanthropic giving and attitudes in the region, the Greater Sacramento Generosity Project, highlighted the challenges local nonprofits face.
The project found that in El Dorado, Placer, Sacramento and Yolo counties only 62 percent of households had made a charitable contribution the prior year (compared to the national average of 66 percent). Worse, the average amount reported given locally was about $700 less, 38 percent below the national average.
These results mirror findings of a study called "How Americans Give" conducted by the Chronicle of Philanthropy several years ago. Using aggregate data from itemized returns, this study found that on average Americans reported contributing 7.12 percent of their after-tax income to nonprofits. In this region (Amador, El Dorado, Placer, Sacramento and Yolo counties), it was 6.85 percent. And the average amount per household given locally to nonprofits was about $1,100 (32 percent) less per household: $2,431 vs. $3,563 nationally.
So, at a time when the region's nonprofits are struggling to serve the greatest level of need in decades (with significantly less resources to do so in one of the nation's most challenging fundraising areas) it is troubling to see Washington pushing to decrease the deductibility of charitable contributions for the most generous donors. Right now, depending on your tax bracket, up to 35 percent of the charitable contributions you make can be deducted from your federal income tax. The proposed "tax reform" would reduce that to a maximum of 28 percent.
That may not sound like a big deal, but it will hit the arts, education and health care hard because those are the areas most frequently benefiting from high-dollar gifts.
The projected impact of this change in the tax code would be to reduce charitable giving by as much as $9 billion annually nationwide. That's huge! To put that into perspective: That's more than the American National Red Cross, Salvation Army, Boys & Girls Clubs of America, Habitat for Humanity and Volunteers of America combined received in contributions last year. It is more than double what all 1,200 United Ways nationwide raised last year. It is a very big deal.
Moreover, converting philanthropy into taxation sets a dangerous precedent. And we all know where the money would be used most effectively and efficiently. There is more than a little bit of irony in the proposal. Across the country, thousands of nonprofits function as partners of federal, state and local government programs. Taking support away from these nonprofits could put more of the burden of providing services back on governments – canceling the benefits of increased tax revenue.
But the bottom line for us is this: The last thing our regional community needs right now is a disincentive to those among us who are most capable of making philanthropic gifts to support the good works of nonprofits.
Andrew Watt, national president of the Association of Fundraising Professionals, put it this way: "2008 and 2009 were two of the worst fundraising years ever, with significant drops in giving across the board affecting every type of charity. Capping the deduction just when we're starting to see the smallest signs of economic recovery is exactly the wrong move to make."
We urge you to let the administration and your local members of Congress know how bad an idea it would be to undermine the viability of the nonprofit community.