What’s a few billion dollars? A lot for charities

At his press conference on Tuesday, President Obama seemed willing to dig in his heels on a proposal to cut deductions for charitable giving. While seen from the prism of making the wealthy suffer more, what the consequences of the move are is that charities will feel the pain when donations drop. Here is what the president said about that at the press conference when asked whether he’s convinced that charities are wrong in their thinking:

Yes, I am. I mean, if you look at the evidence, there’s very little evidence that this has a significant impact on charitable giving.

I’ll tell you what has a significant impact on charitable giving is a financial crisis and an economy that’s contracting. And so the most important thing that I can do for charitable giving is to fix the economy, to get banks lending again, to get businesses opening their doors again, to get people back to work again. Then I think charities will do just fine.

However, a study conducted by Bank of America and Indiana University’s Center on Philanthropy found that curtailing the charitable tax deduction would “somewhat” or “dramatically” decrease the contributions of 47 percent of affluent donors. The study also reckoned that Obama’s budget would cut donations nationally by $10 billion to $20 billion per year. That’s a lot of money to charities and, in a time when people are struggling due to the economy, it puts the groups most willing to help in a bad position.

And how much does it help the government to bring in that extra revenue from decreased deductions? Michael Rosen, writing in National Review Online, says that estimates from Office of Management and Budget say that the government will see a yield of only $7 billion in revenue in the 2011 fiscal year. Considering how the government gets things done compared to charitable organizations, that’s not a lot.

So, respectfully, we must disagree with the president on this one. There will be a significant impact on charities. And, it will go beyond just what they can bring in each year. It will affect the services they can offer and how people will look at the work of charities. Instead, the president’s decision will place the government in the role of the charitable organization. It’s a poor replacement and that’s a mistake.

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3 thoughts on “What’s a few billion dollars? A lot for charities

  1. In some ways I wish that deduction were never there (just like, in more than just *some* ways, I wish 99.9% of the inane U.S. tax code were never there). Regardless of whether donations (and, as you know, this has personal implications) drop, it encourages giving for the wrong reasons.

    Yes, people do give just because of the deduction. I know some of them. I know that some have NOT given to us, in certain instances, simply because the situation would not have allowed the deduction. This is frustrating to us personally and to the ministry, whose hands are tied by IRS rules (Although in the last few months the boss has thought of a workaround — legal, of course.). Regardless, as a Christ-follower I’d rather see people giving to ministries because that’s where their heart is.

    For ordinary plebs like us it often doesn’t matter anyway. This year the standard deduction was more than itemized – even with mortgage interest, charitable giving (10% plus) etc etc.

    On a somewhat related note, I started writing an article last month on how the economy was affecting giving, and I learned that giving does not *necessarily* decrease during recessions: http://philanthropy.blogspot.com/2009/01/great-depression-giving-data-sources.html .

  2. You’re right, Paul. I just want to say that in no way do I want to intimate that tax deductions should play a part in charitable giving. That kind of thinking totally misunderstands what charity really is.

    What I don’t care for, however, is punitive taxation. It seems the current administration has put a goal of punishing a certain segment of society above everything else — including the honorable work of charitable groups.

    Thanks for reading and commenting. I deeply appreciate the work of charities and I would like to add that the majority of those responding in the survey I cited said tax deductions would have no impact on their giving. And that’s only right.

  3. I’m with you on a desired lack of punitation, which I eluded to by my 99.9% comment. I’m one of *those* people who’d rather see a flat tax — or, if you really want to argue it as some do, a few different brackets each with their own percentage. No one in their right mind can look at the American tax code and think anything good of it. It’s creator’s intentions, maybe. But the actual present code with all of it’s deductions and credits and exceptions and this and that.

    No.

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