The tax reform bill currently being considered in the Senate, and the one passed recently in the House, would cause significant harm to the charitable sector in our country and to those who charities primarily serve—low- and middle-income workers and families.
Both bills severely weaken the charitable deduction—which has been a proven incentive for giving in American for 100 years. The bills would result in the charitable deduction no longer being available to 95% of all taxpayers, because of the proposed expansion of the standard deduction.
A new study by the Tax Policy Center estimated that charities would lose between $12 billion and $20 billion next year because of the tax bill’s effective elimination of the charitable incentive for donating to nonprofits. A study by the Indiana University Lilly Family School of Philanthropy found similar drops in giving. That would mean a reduction of at least 5% in total charitable giving. And this does not include additional drops in giving that would be caused by changes to the estate tax that are in both the House and Senate tax bills.
This loss of charitable donations is no minor matter for nonprofits that are already struggling with tight budgets; these lost dollars would translate directly to reduced services for our communities. It would mean less dollars to fund private food banks, homeless or domestic violence shelters, day care, job training; the list goes on. It would also mean a loss of thousands of nonprofit jobs.
Another huge problem with the House tax bill is that it will eliminate the Johnson Amendment, which for more than 60 years has kept partisan politics out of nonprofits and philanthropy. The Forum strongly opposes any weakening of the Johnson Amendment, which would greatly harm the charitable sector’s trusted and essential space in our civil society and risk diverting dollars from charitable purposes to political purposes.
Imagine, if you will, the boards of nonprofits or foundations being pressured to endorse and fund political candidates on all ends of the political spectrum. Imagine political donors funneling their campaign donations away from political entities and into nonprofit organizations, where their political contributions won’t be taxed and won’t be made available to the public.
Allowing charities to endorse and support political candidates is tantamount to allowing politicians to use the public’s goodwill towards the charitable sector as a vehicle to advance their own partisan political agendas. This would have the effect of politicizing and thereby erasing the public’s high trust in charities, painting them as partisan organizations rather than the nonpartisan community problem solvers that they are.
As the largest network serving philanthropy in America, United Philanthropy Forum urges all Senators to support including a universal charitable deduction in the current Senate tax-reform bill, in order to prevent the current tax legislation from causing a significant drop in charitable giving. A universal charitable deduction will allow taxpayers at all income levels to take advantage of this 100-year-old charitable giving incentive. Without such a tax incentive, the bill would have a devastating impact on the many Americans helped by charities every single day in every corner of our country.
The Forum also calls on Senators to oppose any efforts to insert language into the current Senate tax legislation that would weaken or repeal the Johnson Amendment. Injecting partisan politics into the charitable sector would undermine the public trust in charities and make it much more difficult for them to do their important community work. Nonprofits need to be focused on serving the critical needs of the less fortunate among us, not serving the partisan needs of politicians.
President & CEO, United Philanthropy Forum
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