Republicans in Washington are about to drop a lump of coal into the Christmas stocking of every charity in America.
By now, we’ve all learned how much this tax bill rewards the super-wealthy and multinational corporations at the expense of the middle class. But I want to highlight one striking point that hasn’t received as much attention as it should: the terrible impact this bill will have on charitable giving.
By effectively eliminating the tax deductibility of most Americans’ charitable donations, the GOP’s plan removes any economic incentive for most people to give. Many people will continue to donate, regardless of the tax consequences — because they are generous. But fewer people will donate, and those who do may donate less — resulting in an estimated $20 billion in lost donations in 2018 alone.
I oversee charities in my State. Charities help educate our kids. They operate cultural institutions. They feed the hungry, shelter the homeless, provide health care, and do so much more. After disasters like Hurricane Sandy and Maria, or California’s wildfires, they helped families across the country recover. Charities are also a crucial economic sector, representing 18 percent of New York’s private sector work force. And they depend on people’s generosity for support.
By doubling the standard deduction without protecting the charitable deduction, Republicans are effectively eliminating the charitable deduction for millions of Americans.
According to the Tax Policy Center, approximately 30 percent of taxpayers currently “itemize” their deductions — which means that they take specific deductions, such as charitable contributions, instead of a standard amount. If this bill passes, as few as five percent of households would continue to do so, according to the National Council of Nonprofits. That means that millions would lose the tax incentive that inspires much of the charitable giving across the country.
What does that mean for some of our country’s biggest charities?
The United Way recently said that “because of our reliance on middle-class donors, cumulatively, United Ways across the U.S. will face losses between $256 to $455 million per year, significantly impacting their ability to help those who will now be in potentially greater need.”
The effect could be worse in states like New York because the current tax bill also limits deductions for state and local taxes. These deductions are vital to New Yorkers, and a major reason many New Yorkers itemize. Fewer New Yorkers itemizing will mean fewer New Yorkers who can deduct charitable donations.
The bill will also slash the number of super-sized donations that often come from large, multimillion-dollar estates. Today, estates valued at more than $5.49 million are required to pay the estate tax, which gives these estate holders a major incentive to reduce their estate size by making charitable gifts. The Republican tax bill allows estates worth up to $11 million to avoid the estate tax — eliminating the tax incentive to give for thousands of super-large estates below this new, larger threshold. This change could siphon as much as $4 billion from the charitable sector.
To make matters worse, the bill imposes new taxes directly on non-profits. The new taxes, which total upwards of $7 billion, are one part of Congressional Republicans’ desperate attempt to recoup some lost tax revenue that they give to the super-wealthy, large corporations, and wealthy estates. For example, the bill taxes private university endowments, breaching the principle that donors’ contributions should be held in trust and used for charitable purposes like scholarships. In New York, we already know that this provision will hit several of New York’s best colleges and universities hard.
At the end of each year, many Americans open their wallets and give some of their hard-earned money to charity. We should celebrate and encourage this giving. But this tax bill does the opposite. It will damage some of my state’s — and our country’s — most important charities, and those who rely upon them. All to give a big tax cut to the wealthiest and to multinational corporations. Congress and President Trump should scrap this bill.