Trump's tax plan puts charitable sector in 'harm's way,' nonprofit leaders say
Most Americans are poised to lose any tax incentives to give to charity under the final Republican tax bill negotiated Friday.
A trio of Western Pennsylvania nonprofit leaders say they fear the “misguided bill” will thrust the charitable sector “directly in harm's way” and reduce giving in a seven-county region by as much as $60 million a year.
“I do believe that people who give to charity, their primary impulse is to give to a good cause, it's not to save money,” said Maxwell King, president and CEO of The Pittsburgh Foundation, “but the tax deduction makes a difference in how often they give and how much.”
King joined United Way of Southwestern Pennsylvania President and CEO Bob Nelkin and Samantha Balbier, executive director of Greater Pittsburgh Nonprofit Partnership President, which represents more than 140 nonprofit groups, in issuing a statement criticizing the GOP measure as an “attempt to fund a tax cut bill on the backs of those most in need and to push away the charitably inclined who are willing to help.”
They urged Congress to “incentivize, not hinder, local philanthropy.”
“To accommodate generous tax cuts for narrow segment of our populations, crafters of the plan have placed the charitable sector directly in harm's way,” the joint statement said. “Our region's most charitable and most vulnerable residents stand to lose.”
President Trump championed the omnibus package dubbed the Tax Cuts and Jobs Act as a boon for taxpayers and victory for Republicans who've long sought to rewrite the loophole-cluttered tax code.
The measure came under assault by Democrats who say it is unfairly tilted in favor of business and the wealthy.
The deal struck Friday is set to roughly double the standard deduction to more than $24,000 for a married couple filing jointly. The change is expected to drastically lower the number of people who itemize taxes, particularly for middle-income families.
“The very, very well-to-do donors may still itemize, so that will be OK,” King said.
To encourage giving among low- to middle-income households, King joins national nonprofit leaders in calling for a follow-up bill to establish a universal charitable deduction, which taxpayers who do not itemize would get on top of the standard deduction.
The Indiana University Lilly Family School of Philanthropy estimated that about 30 million households with incomes between $50,000 and $100,000 will be less likely to itemize their deductions, which would effectively tax their charitable giving. A study by the school estimated U.S. giving could drop by $4.9 billion to $13.1 billion a year.
Local charities could take the brunt of the burden, as lower-income Americans tend to support local charities and churches.
In Pennsylvania, 1.5 million taxpayers claimed a charitable deduction and reported giving $7 billion to charity in 2015.
“If tax incentives matter for corporations, a position that has the highest of priority in the tax cut bill, then they matter for families, too,” King, Balbier and Nelkin said in their joint statement.
In Allegheny County, they estimate the drop in giving will total $38.5 million; Butler County giving could fall by $5.1 million and in Westmoreland County, giving could decline by nearly $7 million.
Those estimates are based on the premise used by the Washington-based Tax Policy Center and a local United Way consultant that without tax incentives, overall giving will drop by 5 percent.
“Honestly, we don't know precisely what the impact will be, but we're fearful of the combination of this bill reducing dramatically the number of people who itemize and therefore take a charitable deduction, then also getting rid of the mandate of the Affordable Care Act, which will mean hundreds of thousands of people will probably lose their health care,” King said.
A universal deduction could not only make up for the drop in giving but spike annual donations by $4.8 billion, the Lilly study found.
King, Balbier and Nelkin had been in touch in recent weeks with state Sen. Pat Toomey's office urging support for the universal deduction.
Toomey's office did not return a call for comment.
The total amount of tax breaks in the legislation cannot exceed $1.5 trillion over the next decade under budget rules adopted by the House and Senate. The legislation would add billions to the $20 trillion deficit.
The GOP leaders are trying to muscle the bill through Congress next week, handing Trump his first major legislative victory by Christmas.