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Op-Ed: Proposed Tax Reform Could Spell Trouble for Lehigh Valley Nonprofits

By Erika Riddle Petrozelli, CPA, is director of donor services for the Lehigh Valley Community Foundation.

For many of us the Thanksgiving holiday kicks off a season of joy, gratitude, and goodwill.  It is a time in which many of us plan our philanthropy, supporting charitable causes that are near and dear to us.  Nonprofits in the Lehigh Valley are dependent on gifts from individuals in order to deliver services to those in need throughout the year.  This season of giving is also now the backdrop for the current tax reform bill under consideration by the U.S. Congress.  Unfortunately, the proposed tax legislation may have dire consequences for charitable giving for years to come.

For 100 years, the U.S. tax code has incentivized the giving spirit, and today’s tax code recognizes you for your generosity by offering a reduction to your tax bill, subject to certain limitations and assuming you itemize deductions.  This financial reward increases the value of your charitable gift, but it is threatened by today’s tax reform bill.

Both the House bill that passed on November 16th and the Senate’s tax reform proposal, which has not yet come to vote, include a doubling of the standard deduction.  Why does this matter for charitable giving?  The Joint Committee on Taxation estimates that doubling the standard deduction would dramatically reduce the number of taxpayers who itemize, therefore removing the incentive of the charitable deduction for all but the wealthiest 5% of taxpayers.

Further confirmation of an impact to philanthropy comes from a recent study by the Tax Policy Center, who states that under the House’s tax reform bill (H.R. 1), charities could see a staggering loss of $12 - $20 billion in contributions annually, equal to 6 percent of all individual giving on the low end.  This loss in charitable giving would generate significant, negative consequences for the over 1,200 Lehigh Valley nonprofits that are dependent on your generosity to perform good work in our region.

We know that an innate desire to do good exists on the part of philanthropists—we call it the “giving gene”—so philanthropy will continue in some way, with or without a financial incentive to do so.  But, if a financial incentive exists, then it should not be reserved for only a portion of taxpayers, and it should not be reduced in such a way that causes dire consequences.

An alternative solution has been proposed to protect the financial reward and recognition of charitable giving.  A “universal charitable deduction” is one that would be available to all donors, regardless of whether one chooses to itemize or take the standard deduction.  This so-called “above the line” solution will preserve charitable giving by encouraging Americans to continue to direct their dollars to charities that matter to their communities.  Industry groups even estimate that a universal charitable deduction could result in additional charitable giving of almost $5 billion per year!

Imagine the impact of even more generosity in our community—the homeless that can be sheltered; the hungry that can be fed; the children that can be taught; and the sick that can be treated.  Now imagine the impact of a staggering loss in philanthropy.  You can help prevent this.  As a donor, write to your Congress members about the importance of preserving and recognizing the charitable spirit and the consequences of reducing incentives for philanthropy.  As a nonprofit, tell your Congress members about your services and how the population you serve could be impacted by reduced giving.

This is the moment to take action in support of philanthropy and in support of your neighbors in need.  Tell our Senators to vote NO on the Senate tax bill if it does not preserve the full scope and value of the charitable deduction.  If there is a time for our government representatives to hear from us it is now, before Congress moves forward with a tax bill that cannot live up to its ideal of being fairer and helping all Americans, especially those that depend on the services of charities across the country and in our own backyard. 

The op-ed was published by The Express-Times at: http://www.lehighvalleylive.com/opinion/index.ssf/2017/11/tax_reform_could_spell_trouble.html