NBA Oklahoma City Thunderís Russell Westbrook and his Why Not? Foundation host Thanksgiving dinner for the underprivileged at an Oklahoma City Boys & Girls Club. Charities are anxious about fiscal cliff deals limiting tax incentives and thereby donations.
The season of giving is turning into an anxious time for charities and nonprofits worried that efforts to avert the fiscal cliff may limit the tax incentives for making charitable donations.
A group called the Charitable Giving Coalition is flying more than 200 executives from nonprofits to Washington on Dec. 4 and 5 as part of a lobbying blitz to preserve the federal tax deduction for charitable contributions, a target of deficit reduction efforts since President Barack Obama proposed capping it in 2009 to help pay for the health care overhaul.
Coalition members expect congressional negotiators and the Obama administration to consider the idea during the lame-duck session as part of a possible compromise that could raise more revenue from upper-income earners without increasing their tax rates. Curtailing the deduction could raise $219 billion for the Treasury over a decade, according to the Joint Committee on Taxation.
Officials from charities such as United Way Worldwide and YMCA of the USA say limiting the deduction would hurt societyís most vulnerable people by dampening enthusiasm for charitable giving and limiting the services they can deliver to the poor and jobless.
ďItís misguided to think itís a way of getting more revenue from the rich. The impact will be felt by people at the bottom of the economic spectrum,Ē said Steve Taylor, senior vice president and counsel for public policy at United Way Worldwide in Alexandria, Va. He said the consequences could be compounded if cuts to federal social service programs get wrapped into a budget deal.
There are several options for changing the deduction. Obama has proposed limiting the value of charitable and itemized deductions for upper-income families earning more than $250,000 to 28 percent from 35 percent. The National Commission on Fiscal Responsibility and Reform advocated replacing the deduction with a 12 percent tax credit, but only for donations above 2 percent of adjusted gross income. Former Republican presidential nominee Mitt Romney proposed a hard cap on all itemized deductions, including charitable donations, mortgage interest and state and local taxes.
The multiple options and intensifying efforts to reach an agreement are prompting nonprofits to warn about dire economic consequences facing charities, universities and some health centers if the deduction is altered.
The National Council of Nonprofits cites projections that Obamaís proposal could reduce charitable giving to nonprofits by as much as $7 billion a year. Economist Martin Feldstein has written that, on average, a 10 percent cut in the cost of making a donation raises a personís charitable giving by about 10 percent.