The Minnesota House of Representatives’ decision to eliminate the state’s current charitable tax incentives is a mistake that the Senate and governor should not support.
The Minnesota Council of Nonprofits, the Minnesota Council on Foundations, Greater Twin Cities United Way and GiveMN — four of Minnesota’s leading nonprofit and philanthropic organizations — are deeply concerned that replacing the charitable tax deduction with a credit for giving above a threshold will reduce incentives for giving.
The proposed new credit would be available only to Minnesotans who donate more than 2 percent of their incomes to charities. The average Minnesota family, earning around $57,000, would have to contribute more than $1,100 to charity in order to meet the threshold and receive any tax benefit. Thousands of Minnesotans who currently receive state tax recognition for their charitable giving would receive nothing under this proposal.
The tax credit proposal aims to achieve a worthwhile goal — treating all Minnesota charitable donors similarly. It is true that Minnesota’s tax code provides a more substantial tax benefit for people who itemize their deductions than for those who don’t. While the change to a credit would eliminate this inequity, it would create a new inequity — providing no credit to those who do not donate more than 2 percent of their income, which we recognize as a stretch for many and an impossibility for some.
Minnesota is a state of givers. In every community throughout this state, Minnesotans are actively involved in their communities — whether serving on boards, volunteering, or giving to the charitable organizations of their choice. As leaders in the nonprofit and philanthropic sectors, we are proud to support myriad community-based efforts and the people who contribute to them.
It is important that state policy sends the signal that we value and count on charitable giving — not just for those who can give a substantial amount of their income, but for everyone. For the college student who works in a restaurant and contributes to the local mentoring program. For the single parent who supports the local after-school tutoring program that serves the children in her neighborhood. For the family — a nurse, a teacher and two college students — who volunteer together at the local food shelf, making a financial contribution as often as they can.
Our tax system should fully recognize their giving — their decision about how to support their community — not limit tax incentives to those who are able to donate the greatest share of their income.
In the coming days, the Tax Conference Committee will put together final tax legislation. We urge the conference committee to maintain our existing tax incentives for charitable giving. The plan advanced by the Minnesota House reduces Minnesota’s commitment to tax incentives for charitable giving by $64 million over the next two years, but at the great expense of turning Minnesota’s commitment to charitable giving in the wrong direction.
Jon Pratt is executive director of the Minnesota Council of Nonprofits. Sarah Caruso is president and chief executive officer of the Greater Twin Cities United Way.