Charitable Deduction May Be at Risk
April 28, 2011
As budget negotiations unfold, we continue to keep you aware of potential cuts and threats to funding for our vital safety net programs. Unfortunately, as Congress has begun work on the FY2012 budget, a new threat has emerged.
The Current Debate and Its Emerging Threat
Congress is gearing up to begin serious debate on raising the debt ceiling. As a start to this debate, President Obama recently announced that he intends to create a new group made up of leaders from both parties and led by Vice President Biden to reach a “final agreement on a plan to reduce the deficit and get it done by the end of June.”
Among the items in the president’s proposal is a plan to reduce the deficit by limiting federal spending on itemized deductions “from home ownership to charitable giving.” As he has in his last three budget proposals, the president again called for capping charitable and other deductions for households with incomes of more than $250,000 per year. The measure has been defeated in previous budget proposals. However, in those cases the cap on deductions was requested in conjunction with other issues that far overshadowed the proposal, making it much easier to defeat. That is not the case this time, and discussions are set to begin on May 5.
Also in early May, the bipartisan group of senators known as the “Gang of Six” plans to introduce legislation that embodies the deficit reduction proposals of the president’s Commission on Fiscal Responsibility and Reform, which issued its report last December. The commission proposed eliminating the charitable deduction and replacing it with a 12 percent credit for charitable gifts that exceed 2 percent of an individual’s adjusted gross income. According to experts, including Independent Sector, little is known about how this proposed change will affect charitable giving, and it would not be responsible to adopt this significant policy change until its effects are clearly understood.
Why the Charitable Deduction is Important and Fair
While Americans give to charitable organizations for many reasons, studies have shown that tax policy greatly shapes the size and number of charitable donations. It has been estimated that, with no deduction for charitable gifts, annual giving would drop by between 25 percent and 36 percent and the proposed cap could cost charities as much as $7 billion a year in contributions.
The charitable deduction is a way to enrich communities, not individual taxpayers. Unlike other tax deductions that subsidize personal expenditures, the charitable deduction provides an incentive for people to give money away to benefit others.
Independent Sector has created a one-pager on the charitable deduction that we encourage you to use in your conversations with Capitol Hill and administration staff, as well as your own staff, affiliates and stakeholders.
How Volunteers of America is Responding
As many of you know, Volunteers of America is a member of Independent Sector and we are on their Public Policy Committee. We have been working very closely with them and will continue to do so in order to do whatever is necessary to preserve this important revenue stream.
We ask that you join with us by making calls and sending messages to the members of Congress who are shaping the debate. We must make sure that they know that these cuts go beyond tax breaks and will greatly impact the vital safety net that we, and many like us, provide in communities across the United States. Unfortunately, too many federal strategies to reduce the deficit are causing disproportionate harm to those with the greatest needs.
What You Can Do
- Please contact the members of Congress who represent your organization and the people you serve. Ask them to protect the charitable deduction as a fair and important incentive for charitable giving. Let them know that we depend on the charitable gifts that this tax incentive generates. Congress is currently completing its spring district work period, which may provide an opportunity to speak with your representatives while they are at home.
- Pass this message on to other like-minded organizations and others within your network. Every voice needs to be heard in this debate and we need to make sure that other organizations join in to help preserve the charitable deduction. The more concerned groups that let Congress know that this is not a fair or reasonable action to take, the greater the chance of its defeat.
Targets to Contact
Members of Congress participating in the deficit reduction negotiations led by Vice President Biden:
Senator Max Baucus (D-MT)
Senator Daniel Inouye (D-HI)
Senator Jon Kyl (R-AZ)
Congressman Eric Cantor (R-VA)
Congressman James Clyburn (D-SC)
Congressman Chris Van Hollen (D-MD)
Senators developing legislation to implement the Commission on Fiscal Responsibility and Reform:
Senator Saxby Chambliss (R-GA)
Senator Tom Coburn (R-OK)
Senator Kent Conrad (D-ND)
Senator Mike Crapo (R-ID)
Senator Richard Durbin (D-IL)
Senator Mark Warner (D-VA)
And, of course, your own representatives and senators.
Use our sample letter to contact your members of Congress.
Sources: Independent Sector, Congressional Quarterly and The Washington Post
