There’s a chill wind coming that could slice through cancer research, hospice care, job training initiatives, children’s literacy and arts programming, health care, food and shelter for the needy, and much more.
Right now, Congress is weighing a tax reform package that – if it passes – would likely cost the nation’s nonprofits $14-$24 billion in the form of charitable gifts from generous Americans. If Delaware’s loss of charitable giving were proportionate to its population, it would mean, conservatively, that the state would see a reduction of tens of millions of dollars.
The current tax reform proposal threatens to eliminate the charitable tax deduction for 95 percent of taxpayers, thereby eliminating one of the most cherished incentives for making charitable gifts.
As representatives of the state’s nonprofit and philanthropic sector, we are deeply troubled about the likely impact of this legislation.
People donate to charities for many reasons – for the joy it brings them, because “it’s the right thing to do,” because they are moved by issues and challenges, or because they are asked by friends. But research shows that people give more when a tax deduction is available.
As one donor said recently, “Changing the tax benefit will not change my decision to give, or who I give to. But it will affect the amount I give.”
The charitable tax deduction is part of the structural underpinning of the nation’s nonprofit sector, which touches every single American, from the poor and voiceless to the wealthy and privileged.
If Congress eliminates the charitable tax deduction for all but the wealthiest five percent, the result will be an enormous drop in the dollars available for the nonprofits that fill the gaps between what the public needs and what government provides. This would mean a sea change in how basic services are provided in this country.
So what would happen to the afterschool programs and addiction treatment services that reduce crime on our streets? What about the workforce development and small business initiatives?
There are alternative proposals that could encourage greater charitable giving. For instance, the Universal Charitable Giving Act (H.R. 3988/S.2123) would allow non-itemizers to deduct charitable gifts up to $4,000 per individual and $8,000 per couple each year – on top of the standard deduction of $2,100 per individual and $4,200 per couple.
But, for now, this proposal is not part of the tax reform package in negotiation.
We are grateful that Delaware’s elected officials continue to stand strong against this element of the tax reform proposal. Sen. Tom Carper, Sen. Chris Coons and Rep. Lisa Blunt Rochester are passionate advocates for legislation that encourages philanthropic giving and facilitates the work of nonprofits to improve the quality of life for all Delawareans.
However, if something doesn’t change, this version of tax reform may pass, and it will change Delaware – and America – in fundamental ways. We urge our nation’s lawmakers to make a different choice.
Stuart Comstock-Gay is president and CEO of the Delaware Community Foundation. Sheila Bravo is president and CEO of the Delaware Alliance for Nonprofit Advancement. Cynthia Pritchard is president and CEO of Philanthropy Delaware. Michelle Taylor is president and CEO of the United Way of Delaware