This article originally appeared as a column for the Cleveland Jewish News.
Every level of government, from the smallest municipality to the federal government, must tackle tax issues. Politicians, pundits and, of course, prospective tax payers will each weigh in, offering separate opinions as to how best to generate the funds the government needs to operate without breaking the back of the average citizen or losing his vote.
President Donald Trump recently released a skeleton outline of his tax plan. The plan proposes sweeping overhauls that, among other things, aims to significantly increase the standard deduction to $12,000 for a single filer and to $24,000 for a jointly-filing married couple. And, for many middle-class Americans, higher standard deductions do away with the complicated process of itemizing deductions for things like qualifying medical expenses, state and local taxes paid, and charitable contributions.
A simplified tax filing process is certainly something taxpayers could get behind. But charitable organizations have some concern as to what impact this plan may have on their bottom lines. Certainly, people donate for benevolent reasons; they do it because they genuinely want to see a cause succeed and because it feels good to do good in the world.
But charitable organizations are well aware that people also give because they derive some direct benefit from it. At certain levels of giving, name recognition may be involved. Perhaps the giver will see their name in a printed program or on an inscribed plaque or brick, or even on the entrance to a hospital wing or theater. Maybe they benefit by having a cleaner home after donating unwanted clothing or household goods.
Or, maybe they get a tax write-off. And, it is the last reason that is causing some concern; if the average taxpayer will no longer get the same tax benefit for his charitable contributions, will he still give at the same level? Nonprofit leaders certainly don’t think so, and experts are estimating that overall giving could decrease by as much as $13 billion to $26 billion per year.
Support is increasing for the concept of a universal charitable deduction, and one congressperson, U.S. Rep. Mark Walker, R-N.C., has introduced the Universal Charitable Giving Act, which proposes to offer an incentive for lower and middle income families to keep or start giving, by allowing them to deduct their charitable donations in an amount of up to one-third of the value of the standard deduction, without itemizing.
Clearly, it is far too soon to know if any of these tax changes may come to fruition or in what form. But, it is apparent that the proposed Trump reforms would mean that as many as 95 percent of taxpayers would derive no value from itemizing deductions and, therefore, no additional tax benefit for charitable giving.
The National Council of Nonprofits responded with a statement calling for Congress and charitable nonprofits to “quickly identify relevant data and come to a consensus on how best to improve the universal charitable deduction so that all American taxpayers, not just 5 percent, benefit from the tax incentive for donations designed to make a difference in local communities across the country.”