Roy C. Jones, CFRE
Congress is examining potential ways to cap, decrease or completely eliminate the tax deduction for charitable giving. This deduction, which has been in place since 1917, allows individuals to receive a deduction in their taxable income for the money they donate to charitable organizations.
These donations are vital to the work of every nonprofit organization in America. I am part of a team that helps raise more than $50 million to organizations helping the homeless and the working poor in metropolitan areas throughout the United States. Theses funds allow us to provide shelter, clothing, meals, rehabilitation and treatment, job training, and other services. Citizens give to charities and receive the deduction. Not-for-profit groups receive the donations and provide the services. As a result, the government doesn’t have to pay for these services.
Everyone wins!
The system works for all. In fact, in a recent poll 70% of individuals opposed the elimination of the charitable deduction, including 62% of people who did not even claim the deduction last year.
The charitable tax deduction is a proven, time-tested incentive that encourages giving. If the current charitable tax deduction is lowered, it’s estimated that the nonprofit sector will lose approximately $4 billion annually in private giving. If the deduction is eliminated, the loss to the nonprofit sector is even higher.
You might assume that people with the most money give away the most money — and you would be correct. Higher income earners account for the majority of individual giving. It is also true that high-income earners are more sensitive to changes in tax incentives.
Many people give to charities because they have big hearts. They’re generous. They believe that giving is “the right thing to do.” Many other people give because they also enjoy the tax incentive of giving. And, of course, many people fall into both camps.
What is important is that they are giving… period.
These are tough times. A record number of Americans are unemployed. The number of people in poverty — many of them children — is at an all- time high. People need help. Nonprofits serving the poor exist to provide that help.
So why are our federally elected officials thinking about cutting or eliminating the charitable tax deduction? They need the money. They need the tax revenue.
The President and the Congress have put themselves between a rock and a hard place by over-spending. But what’s the benefit of shifting resources away from private nonprofits to the federal government? I can’t think of any. Can you?
Does the federal government know best how people should spend their money? Is the federal government more efficient and effective in caring for the needy than charitable organizations? Can the federal government ever do the work of a local social service agency?
Humbly, I think not. Tens of millions of Americans agree. That’s why we give private donations. That’s why we live in the most generous nation in the world.
Even the famous miser Ebenezer Scrooge came to know the goodness of generosity. As Charles Dickens wrote, “Scrooge was better than his word.. He became as good a friend, as good a man as the good old City knew, or any other good old city, town, or borough in the good old world.”
Before the President and Congress send nonprofits a lump of coal, they would do well to remember the lesson of Scrooge and preserve the charitable tax deduction.
