Charities Urge Baucus to Protect Value of Charitable Deduction

Charities Urge Baucus to Protect Value of Charitable Deduction

News story posted in Congressional Correspondence on 29 September 2009| 5 comments
audience: National Publication | last updated: 18 May 2011
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Summary

A coalition representing a broad cross-section of charities across the country has sent a letter to Senate Finance Committee Chair Max Baucus, D-MT, urging him to protect the value of the charitable deduction. A number of amendments to the America's Healthy Future Act of 2009 would cap the value of itemized deductions to 33 percent or 35 percent for taxpayers whose income tax brackets would increase to 36 percent or 39.6 percent in 2011.

Full Text:

September 21, 2009

The Honorable Max Baucus
United States Senate
511 Hart Senate Office Building
Washington, DC 20510-2602

Dear Chairman Baucus:

As a coalition representing a broad cross-section of charities across the country, we strongly urge you to protect the value of the charitable deduction. With so many Americans relying on the charitable sector, now is simply not the time to jeopardize the charitable gifts that are so important to its strength.

Currently, taxpayers earning more than $200,000 (and families earning more than $250,000) annually can take itemized charitable deductions at a rate equal to their marginal tax bracket (33 percent or 35 percent). A number of amendments to the America's Healthy Future Act of 2009 would cap the value of itemized deductions to 33 percent or 35 percent for taxpayers whose income tax brackets would increase to 36 percent or 39.6 percent in 2011.

Charitable organizations are dealing with enormous financial challenges stemming from the economic downturn. Charities have seen an increased demand for their services as individuals and families struggle with financial uncertainty. At the same time, many state and local governments, facing their own budget challenges, have delayed or reduced payments for services provided by charitable organizations. Facing this combination of growing demand and delayed payments, charities are increasingly turning to private sources for support in a tough charitable giving environment.

Limiting the value of the charitable deduction would hurt these efforts by creating a disincentive for individuals and households who give the most to charitable organizations. According to the 2008 Bank of America Study on High Net-Worth Philanthropy, high net-worth households (household income greater than $200,000 and/or net worth of at least $1 million) account for between 65 and 70 percent of all individual giving in America. And while these individuals and households would probably continue to give if the value of the charitable deduction is reduced, it would likely affect the timing and size of their gifts. Even though the proposals would not take effect until 2011, charities report that donors are already delaying gifts and multi-year pledges.

In addition, a recent study conducted by Michelle and Robert Yetman at the University of California at Davis found that donations to charities that appeal to higher human needs, such as education, arts and culture, and environmental causes, are very sensitive to tax incentives. The authors suggest that decreasing the value of the charitable deduction will likely decrease donations received by these types of charitable organizations.

Again, we urge you to protect the value of the charitable deduction. The charitable deduction, unlike other itemized deductions, encourages people to voluntarily give away their resources for the benefit of others. If anything, incentives for this type of behavior should be enhanced, not reduced. We look forward to working with you, your staff and the Administration to identify additional ways to encourage increased charitable giving among all individuals.

Sincerely,

Suzy DeFrancis
Chief Public Affairs Officer
American Red Cross

Steve Gunderson
President and CEO
Council on Foundations

William C. Daroff Sr.
Vice President for Public Policy &
Director of the Washington Office
United Jewish Communities

John Lippincott
President,
Council for Advancement and
Support of Education

John H. Graham IV, CAE
President and CEO
American Society of Association
Executives

Ford W. Bell
President
American Association of Museums

Kelly B. Browning
Executive Vice President and
Chief Operating Officer
American Institute for Cancer
Research

Adam Meyerson
President
The Philanthropy Roundtable

Anthony W. Conway
Executive Director
Alliance of Nonprofit Mailers

Paulette V. Maehara, CFRE, CAE
President & CEO
Association of Fundraising
Professionals

Brian A. Gallagher
President and CEO
United Way Worldwide

Sr. Georgette Lehmuth, OSF
President and CEO
National Catholic Development
Conference

William C. McGinly, Ph.D., CAE
President, Chief Executive Officer
Association for Healthcare
Philanthropy

Christopher M. Quinn
Executive Director
DMA Nonprofit Federation

Tanya Howe Johnson
President and CEO
Partnership for Philanthropic
Planning

William P. Magee Jr., D.D.S., M.D.
Co-founder and Chief Executive
Officer Operation Smile

John Ashmen
President/CEO
Association of Gospel Rescue Missions

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Comments

Have They No Shame?

If charities that have benefitted from taxpayer largess for decades cannot see a way to risk lower copntributions from their supporters to help support a balanced budget, what hope is there for concessions from the rest of society. True charities are one of the most significant parts of the safety net serving needy Americans, but they are also an example to others as to how we should deal with economic hardship as a country. I expect this position from banks, brokerage houses and auto makers, not the charities that have made this country great. Et tu Brute? Mark B. Weinberg Weinberg & Jacobs, LLP 11300 Rockville Pike Rockville, MD 20852 Voice 301-468-5500 Fax 301-468-5504

Opposition to Cap is Shortsighted

Mark and Ani - thank you both for your well-stated and well-reasoned comments. I could not agree more. The sustained opposition to the tax deduction cap by many of the top leaders and nonprofit advocacy agencies in the U.S. is disappointing in its shortsightedness. If we trust the numerous studies conducted on this topic, tax incentives are far down on the list of why people give to charitable organizations; and as Ani points out, this amendment would only affect a very small percentage of givers anyway. Furthermore, by increasing taxes to support comprehensive health care reform, this should decrease the amount of social services needed to provide health care & insurance to those who don't currently have it - freeing up more charitable dollars for other fields within the sector. I have always believed that the Third Sector has major obstacles to overcome when it comes to collaboration. While this is a great example of collaboration between agencies within the sector, I don't believe it takes into account "the common good", which is (or should be) the reason we are in this profession in the first place.

credit where credit's due

Please note that the writer of this letter is Tom Peters, president and CEO of the Marin Community Foundation. I am simply the poster.

Sorry!

Oops! Sorry about that. Well, thanks for posting it anyway - and thanks to Tom Peters for the excellent letter.

Not all charities agree

Tom Peters, president and CEO of the Marin Community Foundation has a different take. Below is his letter to Senator Baucus. September 28, 2009 The Honorable Max Baucus Chairman, Senate Finance Committee United States Senate 511 Hart Senate Office Building Washington, D.C. 20510-2602 Mr. Chairman: I write to urge your continuing consideration of the full range of fair and appropriate ways to finance a deficit-neutral health care reform plan, including a possible cap on the rate of charitable deduction for the wealthiest taxpayers. I am aware that you have received letters from other organizations urging you not to make any changes in charitable deductions. However, I want you and other members of the Committee to know that there are many of us in the charitable sector who feel that rather than taking reasonable options off the table, it is more important to keep the focus on the larger goal of fashioning an equitable pattern of health care financing. We commend you for trying to do just that. My colleagues and I are acutely aware that many charities are struggling in their fundraising, and that they are understandably worried about the potential effect of capping the rate of charitable deductions. These concerns may well be overstated, however, as shown by detailed analyses from the Center on Budget & Policy Priorities and the Urban-Brookings Tax Policy Center. First, under current proposals, the cap would potentially affect only the wealthiest of taxpayers, approximately the top 1.4% of filers. Secondly, though projections are quite difficult to make, historical review and contemporary polling suggests that capping the rate of deduction may have a relatively minor impact on giving, estimated at less than 2% several years out. We understand that even that reduction to charities could have real impact. But we feel strongly that this is considerably outweighed by the host of benefits that comprehensive health care reform would bring. First, looking at the financial effects on the nation

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