Giving is an American Tradition
Giving is one of many things that has and continues to make America great. Giving is embedded in the fabric of United States (U.S.) culture. Philanthropy is so American that the National Museum of American History has a permanent exhibit documenting Giving in America. In 2015 alone, Americans gave $373.25 Billion to charity. Of that, $264.48 Billion (71%) was contributed by individuals.
In fact, giving is so American that citizens from other countries study the structure the U.S. has in place to support organizations providing community benefit. One mechanism is the charitable tax deduction—a giving incentive that allows donors to deduct charitable contributions of cash and property (within certain limitations) from their tax payments.
In 2017, we celebrate the 100th birthday of this giving incentive. The millions of people and hundreds of communities served as a result of philanthropy are its legacy.
Giving in Pennsylvania
Pennsylvanians give with the best of them. In 2014, individual Pennsylvanians donated $6.74 billion, or 2.4% of their taxable income (Grantmakers of Western PA, 2016).
Pennsylvanians give at every income level. If we see a need, we want to meet it.
More than 1.5 million Pennsylvanians filed tax returns with itemized charitable deductions. Of these:
- 1% had adjusted gross incomes (AGI) of <$50,000 and still gave $548.8 million.
- 1% had AGIs of $50,000-$200,000 and gave $3.05 billion.
- 7% had AGIs of >$200,000 and gave $3.15 Billion.
Why Does this Matter – Right Now?
In 2017, Congress and the new federal administration has included charitable tax deduction as a discussion item when drafting their proposed tax reform policy. On February 16, 2017, PANO and Grantmakers of Western Pennsylvania joined the 200 representatives of the Charitable Giving Coalition and the National Council of Nonprofits in Washington DC and met with members of Congress to talk about how changes to this policy would impact nonprofits nationwide.
As one of the many issues up for debate at local, state and federal levels, a tax deduction may not seem particularly sexy or motivational. But what may galvanize us are the hundreds and thousands of lives that may be impacted. The charitable giving deduction is critical to enhancing the public good, strengthening the economy and lightening the burdens of government, taxpayers and society overall.
- The millions of people served in Pennsylvania because of individual charitable giving.
- The 727,200 individuals who work for Pennsylvania’s nonprofit sector, making up 15% of Pennsylvania’s workforce and contributing to Commonwealth’s tax base. (Independent Sector, 2016)
- The good work provided by over 50,000 nonprofits in the Commonwealth, who are already struggling to meet increased service demands with ever-decreasing resources.
- In 2014, nonprofits in Pennsylvania saw the demand for their services increase by 79%, 50% were unable to meet that demand, with 69% of client needs remaining unmet (National Finance Fund, 2015 State of the Sector Report)
In Pennsylvania, nonprofits survived:
- The 2008 recession
- A 10% cut in human services funding in 2012
- The 10-month budget impasse in 2015-16
Thus, their ability to withstand another reduction in funding is negligible.
Please read two stories of how the Charitable Tax Deduction has impacted those served by two PANO members: New Hope Ministries and For Pete’s Sake Cancer Respite Foundation. Like these two organizations, please share your story—particularly with your members of Congress. And when you talk with them, here are the points you want to cover:
The Charitable Deduction Works
- It is a unique and good policy. It encourages individuals to GIVE AWAY their income, investing it their communities.
- It provides an impressive return on investment. For every $1 of tax benefit going to a donor, those in need receive $2.50 in benefit.
- American voters strongly support giving incentives. Across the nation, 88% of voters believe that Congress should make it easier to deduct charitable deductions from taxes (Independent Sector, 2016).
Tax Reform Concerns
The House Republican Blueprint and President Trump’s Tax Plan propose to double or even triple the standard deduction. While this would increase the number of taxpayers who would take the deduction, it would dramatically decrease the number of itemizing taxpayers—from an estimated 30% to 5%. What this would mean: the charitable deduction would not be available 95% of taxpayers. The Trump Plan would also cap itemized charitable gifts at $100,000 for individuals/$200,000 for jointly-filing couples.
These proposed changes are estimated to reduce giving:
- By 5 to 9% (Tax Policy Center, 2017) or
- By more than $17 billion (American Enterprise Institute, 2017).
Other proposals have proposed a floor on charitable give incentives which sends the message that smaller gifts are less valued than larger gifts. Considering the 256,500 Pennsylvanians who made <$50,000 but still gave nearly $549 Million in 2014, the implications of this bill are troubling. In addition, the Congressional Budget office estimated that a floor of 2% of AGI would reduce annual charitable giving by $3 billion.
Our Proposed Solution
A universal charitable deduction for those taxpayers who do not itemize because:
- People who choose to give their income away should not be taxed for that income.
- All American taxpayers should receive an incentive to give to charity.
- The tax incentive should:
- Increase giving in terms of both dollars and donors
- Increase fairness by treating all taxpayers’ contributions equally
- Provide modest tax relief to middle and lower-income taxpayers
We must remind our elected officials that:
- The charitable deduction works and has an impressive return on investment. (See above).
- The demand for services in Pennsylvania has significantly increased over the last 5 years (See above). Now is not the time to reduce the private support needed to meet those needs.
- Nonprofits are long-time partners with government in meeting community needs.
- Donors and clients are their constituents.
We together are better than anyone is separate. Government, nonprofits and for-profits must link arms to best meet community needs. The charitable giving deduction is one tool that makes this happen smoothly.
- Contact your members of congress today.
- Let your donors know what may be at stake.
- Check out the letter that PANO used to engage with the Pennsylvania delegation.