The following statement is from David Biemesderfer, President & CEO of United Philanthropy Forum, in response to the Tax Cuts and Jobs Act tax reform legislation made public yesterday by the House Ways and Means Committee:
“The tax reform bill released yesterday by the House Ways and Means Committee would have a devastating impact on our country’s charities. The biggest blow to the charitable sector is the bill’s significant weakening of the charitable deduction—a 100-year-old tradition in our country to incentivize charitable giving.
The bill’s sponsors will tell you that they have “protected” the charitable deduction in this legislation, but that is simply not the case. Although it is true that the charitable deduction is still in place with this bill, it will no longer be available to approximately 25 million Americans. That’s because the bill also doubles the standard deduction, which means far fewer taxpayers will itemize on their taxes and thus be able to take advantage of the charitable deduction. In fact, the share of taxpayers who will itemize their taxes will drop from 33% to 5%, and most of the remaining itemizers will be in higher-income brackets. This change will result in a loss of $13.1 billion in charitable contributions each year, according to a recent study by the Indiana University Lilly Family School of Philanthropy. That figure doesn’t include additional losses in giving that will result from other elements of the bill, such as the changes to the estate tax and the weakening of the Johnson Amendment, which risks diverting dollars from charitable purposes to political purposes.
For lawmakers, $13 billion might seem like a rounding error in a $1.5 trillion tax cut plan. But a loss of $13 billion in charitable giving is not a rounding error to the thousands of nonprofits working hard every day to strengthen our communities. $13 billion can build a lot of homes for the homeless; provide a lot of meals for the hungry; cover a lot of care for the sick; and so much more.
Although the bill claims to be about creating jobs (it even has “jobs” is in its title), it could result in a loss of tens of thousands of nonprofit jobs due to the drop in charitable giving that it will create. People sometimes forget that the nonprofit sector is our country’s third-largest workforce, employing 10% of all workers (that's 11.4 million jobs).
If Congress is truly interested in protecting the charitable deduction, it needs to make the charitable deduction available to all Americans—not just the dwindling number of taxpayers who will be itemizing their tax returns as a result of this bill. A “universal” charitable deduction will help make up for the losses in charitable giving caused by the current House tax bill, and will give equal value to the charitable donations of all Americans—including the middle-class families that the bill’s sponsors say they want to help.”
# # #
United Philanthropy Forum is the largest network serving philanthropy in America. The Forum’s membership of 65 regional and national philanthropy-serving organizations, which represent more than 7,000 foundations and other philanthropies, work to advance, inform and support philanthropy. With deep regional roots and a broad nationwide reach, the Forum unites a diverse network to lead change and increase impact in philanthropy. For more information, visit www.unitedphilforum.org.
Associate Director of Policy