The sweeping tax overhaul proposal in the U.S. House may be a boon for business with its rate cuts, but it could have devastating consequences on the nonprofits by lowering incentives for charitable giving, according to two influential Minnesota philanthropic councils.
The Minnesota Council of Nonprofits and the Minnesota Council on Foundations both came out forcefully Friday against the tax plan, which an Indiana University study said could result in a decline from $4.9 billion to $13.1 billion in charitable giving across the country.
While the tax plan by the Republican-led House would retain a deduction for charitable giving, it would nearly double the standard deduction from $6,350 to $12,000 for individuals and $12,700 to $24,000 for married couples.
That would remove a significant incentive to give and likely result in far fewer taxpayers itemizing charitable donations, said Bob Tracy, the Council on Foundation’s director of public policy.
“Now, 35 percent of filers itemize and are able to use the current charitable giving tax deduction. Increasing the standard deduction means only 5 percent of filers will itemize,” Tracy said.
On the other hand, U.S. Rep. Tom Emmer, R-Minn., said in a statement that the tax package promises an economic boost to help young and middle-class families — the people often helped by nonprofits — achieve the American dream.
“This is about pulling our nation out of the past eight years of dismal ... growth and boosting our economy to grow at a rate of 3-4 percent like we know it can,” Emmer said.
Nonprofit leaders said a drop in charitable giving could ripple through Minnesota, where 12 percent of the workforce is employed by nonprofits. At the same time, budget and tax plans may cut government programs for needy populations, putting more pressure on nonprofits.
“Minnesota nonprofits are vulnerable from multiple angles,” said Rebecca Lucero, the Council of Nonprofits’ public policy director.
More than 200 Minnesota nonprofits have signed a letter by the nonprofits’ council expressing a host of concerns with the tax proposal, saying it “undermines our shared prosperity” including cutting social and health programs and reducing tax incentives for charitable giving.
That letter will be sent to the state’s congressional delegation early next week, Lucero said. The Council on Foundations already has been in touch with the delegation expressing concerns with the plan.
“The tax bill is a reflection is of our values,” Lucero said. “The federal budget and the tax bill would take our state and nation in the wrong direction and would put enormous pressure on nonprofit organizations and the communities they serve.”
The National Council of Nonprofits said that while the GOP would enable the wealthy to continue deducting their charitable giving, many middle-class families would no longer get that break because they probably would stop itemizing deductions.
Trista Harris, the Council on Foundation’s executive director, said the charitable tax deduction is a 100-year-old American tradition that benefits everyone and should be maintained.
“I think that all donors, regardless of income level, should have the access and the incentive to contribute to their community’s future through the universal charitable deduction,” Harris said in a written statement.
Philanthropic leaders said that other parts of the tax bill, including the elimination of the estate tax, could also reduce charitable giving.