The Budget Deficit. The Fiscal Cliff. Higher Taxes. Cuts to Entitlements. Whether funded through the government or by private donations, it’s hard for many U.S. nonprofit organizations not to feel anxious and unsettled.
In the midst of the dialogue between Congress and the White House about the budget, and the threat of sequestration (across the board budget cuts set to kick in automatically the beginning of January), the conversation about reforming policy on the charitable deduction has escalated, and with it so has concern across the nonprofit sector.
We at AJLI began talking about the Charitable Deduction in 2011. The deduction was begun in 1917 to subsidize private organizations providing alternative services to government programs. Some experts estimate its cost to the government as $250 billion over the next five years.
Proposals for reform vary widely. President Obama has recommended a hard cap on charitable contributions equivalent to 28 percent of household income. Others are talking about a set dollar amount for all itemized deductions, rather than a percentage. There are many implications and interpretations some positive, some negative, to each. Still others want the Charitable Deduction to stay as is, and others are calling for major reform because the current deduction disproportionately favors the upper class.
At the same time that this debate about deductions is going on, there also is the possibility that domestic programs will be hit with across-the-board spending cuts, thus further stretching the nonprofits that will experience more demand for their services and less government funding to provide those services.
I’m glad I’m not in Washington tasked with the responsibility of figuring out how to create a budget that both meets the needs of the people of this country and reduces the deficit. There are many ways to do that—higher taxes, fewer loopholes, reduced entitlements…we’ve heard them all, and across the Association, I am sure that many different opinions prevail.
We are fortunate that we are not funded (in any large measure) by government grants, although we partner with many organizations that are. We do, however, benefit from the individual givers, who make up the bulk of charitable giving. Between 73%-90% of charitable giving comes from individuals. Certainly not all donations are taken as deductions.
With that in mind, it is important for Leagues and League members to be aware, from both an individual and a League perspective, of the potential consequences of the multitude of budget decisions that will be made in Washington in less than a month. Only weeks remain before the January deadline. There are resources on the Fiscal Cliff and the Charitable Deduction available from the National Council on Nonprofits and a host of other reputable organizations and news sources.
Susan E. Danish
The Association of Junior Leagues International, Inc.