Trump Tax Reform proposal will hit Charities where it Hurts
After a slew of embarrassing legislative failures, the Trump Administration is determined to pass tax reform at any cost.
For over 100 years, charitable tax deductions have been a mainstay in US tax policy. Despite intense ideological divides, both parties have traditionally recognized the economic and cultural benefits of philanthropy. Perhaps prejudicially, I’d infer that the charitable deduction’s longevity validates that voluntary actors such as non-profits, solve problems more effectively than public agencies, namely government.
“…It would be a shame if, in the zeal to simplify taxes, Congress creates a crisis in our communities,” Tim Delaney, President & CEO of the National Council of Nonprofits.
As a philanthropist and fundraiser, one of my primary issues during the 2016 presidential election cycle was candidate sentiment on charitable giving. More than once on the campaign trail, then candidate Donald Trump boasted about the generosity of the DJT private foundation; given the heated exchanges around foundation governance and giving pertaining to both Hillary Clinton and Donald Trump, I was a little more than anxious to learn how our new president would encourage or devalue charitable giving incentives.
In June 2016, the Trump campaign released a tax reform blueprint, detailing (at least) two policy initiatives that would drastically reduce charitable donations:
1. Restricting charitable deductions with a ceiling, eliminating today’s deduction as a percentage of gross income, and 2. Repealing the estate tax, thereby eliminating today’s tax of 40%.
Both policy ideas were thought to have been scrapped the week of inauguration when it was announced that the new President would be starting from scratch to improve the tax code and keep his promise to lower the national debt and allow Americans to keep more of what they earn; that was all before the embarrassing legislative failures in health policy and immigration policy.
Now, the Trump Administration is determined to passing tax reform at any cost. Trump’s senior advisors are in full swing on tax reform as the clock ticks long past the originally planned 100-day mark, a goal that Treasury Secretary Steven Mnunchin stated plainly back in March was ‘impractical.’
…limits on deductions for charitable giving are very much within the realm of possibility.
White House spokeswoman, Natalie Strom, said “all options are on the table until we have a plan to announce,” adding that limits on deductions for charitable giving are very much “within the realm of possibility.”
After the blueprint was released, the American Enterprise Institute and Tax Policy calculated the potential revenue was around $52-$55 billion dollars; a statistically insignificant loss to the government, but a debilitating 15% cut to the voluntary sector.
…Philanthropy Roundtable estimated the donors who use the deduction would decrease from one in four, to one in twenty if eliminated.
Though the estate tax is generally viewed as an obnoxious thorn in the wealthy American side, the charitable deduction is one the group principally benefits from. Ask the Meals on Wheels, Red Crosses, St. Jude’s, Boys and Girls Club’s, Salvation Army’s and other non-profits across the America, and they’ll vouch that the deduction is a benefit crucial to their survival. Last year Philanthropy Roundtable estimated the donors who use the deduction would decrease from one in four, to one in twenty if it was eliminated. Moving down the tax bracket, it’s hard to imagine how a potential $54 billion-dollar loss to food pantries, wellness centers, youth development programs can be justified to low-income Americans.
“The notion of simplifying Americans’ income taxes sounds good in concept, but it would be a shame if, in the zeal to simplify taxes, Congress creates a crisis in our communities,” said Tim Delaney, President & CEO of the National Council of Nonprofits, in a release in response to the tax reform blueprint.
- Nonprofits occupy the marketplace of needs. Over 1.5 million nonprofits are registered in the US, and one in three people use a non-profit service every month.
- Nonprofits are leaner, meaner. The average nonprofit employs fewer than 10 people, whereas the average federal agency employs more than 25; in addition, nonprofits that contract with agencies are not reimbursed for administrative or unplanned expenses, swallowing expenses that would otherwise be put to the taxpayer.
- Government Treats, People Cure. Nonprofits running “general welfare” programs such as delivering or preparing food, providing shelter, supplying clothing and training and placing job applicants are widely regarded as more efficient and effective by participants and philanthropists.
The Trump Administration should do all it can, to empower nonprofits to continue stepping up to the plate. Social Impact Investing (SII) is on the rise, and the collaborative efforts of corporations, philanthropists, community leaders, volunteers, and nonprofits are proving just how well people can alleviate societal problems. By supporting their efforts to the fullest, more Americans will have the quality of life we deserve.
Simone Cherie is a nonprofit advisor, activist, and columnist based in Atlanta, GA. Affiliates: 20/20 Leaders of America and OUTSET Network. More @thesimonecherie