The Charitable Tax Deduction

Eliminating or reducing America’s 100 year old incentive that encourages giving would have devastating consequences for our communities and the millions of people who depend on vital services supported through charitable giving.

Even though tough decisions must be made to address fiscal challenges and reform our tax system, the charitable tax deduction must be preserved.

 It has proven to be extremely effective at encouraging the private sector to serve the public good. It enhances the ability of both individuals and businesses to help those in need, as well as to fund institutions that are the foundation of our civil society.

 According to Giving USA, in 2012, Americans donated more than $300 billion to support charitable causes, with itemized giving comprising more than 80%.

Fueled by the deduction, charitable giving creates a vibrant and economically vital charitable sector. Nonprofits generate $1.1 trillion annually in jobs and services.  One in ten U.S. workers or 13.7 million jobs are in the nonprofit sector.

 Employees of nonprofit organizations earn 9% percent of all wages paid in the U.S.,--$587.7 billion.

For every $1 a donor can deduct for their donation, the public receives approximately $3 of benefit. What other tax provision generates that kind of positive public impact?

Without private support, government (taxpayers) will be called upon to support programs maintained by America’s charities.

Studies show that cutting back the charitable deduction would harm our communities, hitting those who need support the most.

The charitable deduction works. It is different than other itemized deductions because it encourages individuals to give back a portion of their income to their communities.

It’s not about the donors.

Studies show that cutting back the charitable deduction would harm our communities, hitting those who need help the most.  Without private contributions, government (taxpayers) will be called upon to maintain and manage programs currently supported by America’s charities.

Aren’t we better off leaving this to the experts?  The conversation should not be about penalizing the donors-moreover, it should be about what their dollars are doing to aid those in need. 

Since 1917, our tax code has recognized the value of the charitable deduction. Charitable donations benefit the people and communities that are served providing critical support to our communities and the most vulnerable.

By allowing those who give so generously to claim a deduction at the same rate at which taxes are paid, our tax policy has ensured that such gifts are not subject to additional tax.  One cannot be taxed on money they do not have, and on income they do not retain.

A recent United Way Worldwide survey found that nearly 80 percent of Americans believe that reducing or eliminating the charitable tax deduction would have a negative impact on charities and the people they serve.

According to a January 2013 national survey, 75 percent of Americans say they value the deduction as it currently stands.

Sixty-one percent say that they feel strongly about maintaining the current deduction, up from 56 percent in January 2012.

Now is the time to express to our elected officials the importance of the charitable deduction.  Our community depends on it.  The underserved populations we support depend on it, the fiscal strength of our nonprofit community depends on it.

We must maintain the current charitable deduction and this powerful giving incentive and strong American tradition.

As lawmakers in Washington, D.C. work to reform America’s tax code and address our fiscal crisis, America’s charitable sector faces an urgent threat. Congress is considering limits on the charitable tax deduction which would have a devastating effect on the nonprofit sector millions rely on for jobs, support and services.

Harmful changes would set off a cascade of consequences undermining our economy, hitting hardest those who need the most help, shifting more of the responsibility to government to provide vital services and putting at risk billions in private donations that support diverse, worthy causes.

A lasting economic recovery requires a strong charitable sector.

The philanthropic sector’s role as a safety net and innovator is more important than ever. Charities rely significantly – and in many cases entirely – on private donations, particularly now as government funding declines and the demand for social services increases.

Charitable giving – and the charitable deduction – represents a lifeline to individuals and communities in need, generating more than $1 trillion every year in the form of jobs and services. One in 10 Americans works for a nonprofit organization, accounting for approximately 13.7 million jobs receiving roughly 9 percent of wages paid in the U.S.

Charitable giving’s impact cannot be replicated by government or the private sector.

The charitable deduction protects our freedom to create, fund, and operate the institutions that make up the fabric of our civil society. Consider what philanthropic support has made possible:

• Technology and medications to improve our health, like insulin, the polio vaccine, the MRI, electron microscope and pacemaker
• Educational opportunities such as scholarships and after-school programs
• Access to health services, such as mobile health vans and training programs
• Housing and shelter for the homeless, the abused and the addicted
• Arts and cultural activities that inform and inspire
• Protection of the environment, from land conservation to sustainability efforts
• Civil and voting rights
• Preservation of historic treasures, from museums to historic sites

The charitable deduction works like nothing else.

The charitable deduction is different than other itemized deductions. It encourages individuals to give away a portion of their income to help people in need and support worthy causes. It encourages Americans to make charitable contributions—more often and in larger amounts—than they might otherwise do.

According to Giving USA, those who itemized their charitable contributions were responsible for 81 percent of total estimated giving (nearly $229 billion) by individuals in 2012. For every dollar a donor gets in tax relief for his or her donation, the public typically receives three dollars of benefit. It’s unlikely government could find a more effective way to leverage private investment in community services.

In 2013, the Albuquerque Community Foundation made $2.5 million in grants to local nonprofit organizations that exist to feed and house the homeless, treat victims of domestic violence, support veterans, provide senior services, protect animals and treat disease, just to name a few.  The generous donors who made these grants possible earned a charitable tax deduction.

Americans support the charitable deduction, because it works.