President Obama wants to limit tax deductions on charitable giving by the wealthy, those who give an estimated one-third of all charitable gifts. He thinks that capping or cutting the tax deduction on gifts will help the nation avoid the “fiscal cliff.”
Nonprofit leaders oppose such a move.
“President Obama and Congress are considering caps or cuts to the 100-year-old tax benefit for those who give to charities and redirecting these dollars to federal coffers,” wrote Larry Snyder, president of Catholic Charities USA, and Brian Gallagher, president and CEO of United Way Worldwide.
Writing in U.S. News & World Report, they said, “Doing away with the charitable deduction at a time when people are still reeling from the recession and facing the consequences of government cutbacks is bad timing and bad logic.”
They pointed out that in 2011 Americans gave some $300 billion to organizations that provided social services, did medical research and provided food – to name only a few of the areas where nonprofits work.
Snyder and Gallagher argued that “the charitable deduction is different than other itemized deductions. It encourages giving, rewards a selfless act, and helps raise more for charities than would have otherwise been possible. Data suggests that for every dollar a donor gets in tax relief, the public typically receives $3 of benefit. No other tax provision generates that kind of positive public impact.”
Snyder and Gallagher are members of the Charitable Giving Coalition (CGC), which will have leaders in Washington, D.C., on Dec. 4-5, to bring “a dose of reality” to elected officials inside the Beltway.
In mid-November, the CGC wrote Obama expressing deep concern about the negative impact of changing the charitable deduction.
“[W]e urge you not to impose any limit or cap on the charitable deduction, including your proposed cap limiting all itemized deductions at 28 percent for certain taxpayers. We request an opportunity to brief you and your staff on the impact a proposed reduction to the charitable deduction would have on those we serve,” reads the letter.
“People give to worthwhile causes for many reasons – incentives such as tax deductions being among them. Tax incentives make more and larger gifts possible, and they do have an impact on donors. A recent 2012 study found that 33 percent of donors surveyed would reduce their giving if the charitable deduction did not exist. A survey conducted earlier this year showed three out of four Americans say they do not favor cutting, capping or limiting the charitable tax deduction,” said the message.
The letter added: “Tax policy experts have also noted that charitable giving is more sensitive to tax changes compared to other deductible payments such as local taxes and mortgage interest because taxpayers generally cannot adjust or modify their local taxes or mortgage payments. However, taxpayers can adjust their levels of charitable contributions quite easily in response to tax code changes.”
Letter signatories included the American Red Cross, American Institute for Cancer Research, Association of Gospel Rescue Missions, The Jewish Federations of North America, National Association of Independent Schools, The Salvation Army and YMCA of the USA, and a number of others.
Robert Lenzner, a columnist for Forbes, wrote, “President Obama’s proposal to tax the wealthiest 2 percent of the nation by capping their charitable deductions at $50,000 a year would destroy the fund-raising ability of cultural and educational institutions.”
Steve Taylor, United Way’s vice president for public policy, told Time magazine that 15 percent of the organization’s revenue is given by a fraction of 1 percent of its most generous supporters. If adopted, Obama’s plan would hurt United Way.
Catholic Charities president Synder was blunt about Obama’s plan, noting that reduced giving would mean a cut in services his organization provides at the time demand is up.
“If we have to cut back our services, then the government is just going to have more people at their door,” Snyder told Time. “It really is one of those things where you cut off your nose to spite your face.”
When House Republicans trotted out a plan to deeply slash federal spending, a February 2011 EthicsDaily.com editorial offered a forthright critique.
“Budgets are moral documents, and the moral narrative of the House Republicans is simple: Punish the poor and protect the wealthy,” read the piece. “The proposed budget cuts place low-income Americans at risk of hunger, inadequate health care and substandard education and housing. The proposed budget guards the wealthy from paying their fair share in taxes.”
The editorial was titled “What Will House Republican Budget Cuts Do to Churches?”
It was but one of a number of articles that called for protection of the poor in the ongoing debate about taxation, the need for shared sacrifice and honesty about what churches could realistically do. See here, here, here, here and here.
A forthright critique of Obama’s plan to limit tax deductions on charitable giving is now required.
Mr. President, what are you thinking? What will your plan do to churches? What will your plan do to faith entities meeting human needs and advancing the common good?
The nation needs to keep charitable giving as a noble priority – and one that is rewarded with a tax deduction. No, that’s not the only reason or the major reason that people of faith give.
But it is an import reason for some folk who give significant gifts. Charitable giving is fundamental to tens of thousands of houses of faith and their many institutions.
All together, the faith community and the nonprofit sector build up the nation’s social capital. Without these organizations, we would not have the social capital we do. And we certainly need more social capital.
It’s time for pastors and their church members to call their senators and representatives, especially since some Republicans share a similar agenda with the White House.
For more information about how capping charitable deductions would be harmful, visit the Independent Sector site.
Let the White House and your senators and representatives know that capping or cutting the tax deduction for charitable giving is a bad idea.
Robert Parham is executive editor of EthicsDaily.com and executive director of its parent organization, the Baptist Center for Ethics. Follow him on Twitter at RobertParham1 and friend him on Facebook.
Watch the trailer below for EthicsDaily.com’s documentary on faith and taxes, “Sacred Texts, Social Duty.”
Robert M. Parham (1953 – 2017) was the founder and executive director of Baptist Center for Ethics from 1991 to 2017. He served as executive editor of EthicsDaily.com, BCE’s website, from its launch in 2002 until 2017.