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Proposed Deficit Reduction Measures Could Curb Charitable Giving

(Nov. 30, 2010) Two organizations tasked with confronting the U.S. federal deficit have issued draft proposals to reduce the deficit.  Although AFP supports the concept of deficit reduction, we are concerned about proposed changes to the charitable deduction in both proposals.

The Debt Reduction Task Force of the Bipartisan Policy Center, co-chaired by former Sen. Pete Domenici (R-NM) and Dr. Alice Rivlin, proposed replacing the deductions for mortgage interest and charitable contributions with 15 percent refundable credits that anyone who owns a home or gives to charity can claim. The draft report in its entirety is available here.

Alternatively, the co-chairs of the National Commission on Fiscal Responsibility and Reform, former Sen.  Alan Simpson (R-WY) and Erskine Bowles, suggested allowing the tax break only for charitable contributions that exceed 2 percent of adjusted gross income. The draft proposal in its entirety is available here.

More information is available in this Chronicle of Philanthropy article.

AFP urges its members to educate their Members of Congress about these proposals and their potential impacts on charitable giving. Detailed instructions are below.

1.      Identify your U.S. Representative and two U.S. Senators.  Use this link and type in your zip code to determine your U.S. Representative: http://www.house.gov/zip/ZIP2Rep.html. Use this link to determine your two U.S. Senators: U.S. Senators by State

2.      Call the Congressional switchboard (202-224-3121) and ask to speak to your House Member or Senator.

3.      Use the following talking points:

  • We understand the current and immediate challenge of reducing the federal government's debt. However, we caution the federal government about attempting to pay down that debt using charitable dollars. Our nation cannot afford to discourage giving at a time when charitable organizations are facing enormous financial challenges stemming from the economic downturn.
  • Two recent proposals would negatively affect charitable giving.  The Debt Reduction Task Force of the Bipartisan Policy Center has proposed replacing the deductions for mortgage interest and charitable contributions with 15 percent refundable credits that anyone who owns a home or gives to charity can claim. Alternatively, the co-chairs of the National Commission on Fiscal Responsibility and Reform, former Sen. Alan Simpson (R-WY) and Erskine Bowles, suggested allowing the tax break only for charitable contributions that exceed 2 percent of adjusted gross income.
  • These proposals would curb charitable giving when organizations are facing the toughest economic conditions.  The Giving USA Foundation recently reported that in 2008, the decline in total charitable giving was the greatest since the organization began tracking charitable donations in 1956. 2009 was just as devastating with some charities, after years of public service, closing their doors for good.
  • As charities struggle to meet increased demands for their services and raise additional funds, we need to encourage all individuals, regardless of income and wealth, to be more charitable. Limiting the value of the charitable deduction does the exact opposite and would fundamentally alter the tradition of charitable giving that has made America one of the most generous nations in the world.
  • For that reason, we oppose any deficit reduction proposals that would negatively impact charitable giving by reducing or eliminating the charitable deduction.

4.      Mail three letters, one each to your U.S. Representative and two U.S. Senators.

5.      Cut and paste the sample letter below into your word processing software and personalize it with your own information (places where you can include your personal information are indicated in bold in the sample letter below):

Sample Letter

DATE

For U.S. Representative, use:

Dear Representative LAST NAME:
U.S. House of Representatives
Washington, D.C. 20515

For U.S. Senators, use:

Dear Senator LAST NAME:
U.S. Senate
Washington, D.C.  20510

Dear,

I am writing on behalf of [insert name of your organization] and the Association of Fundraising Professionals to urge you to oppose any deficit reduction proposals that would negatively impact charitable giving by limiting charitable tax deductions. 

We understand the current and immediate challenge of reducing the federal government's debt. However, we caution the federal government about attempting to pay down that debt using charitable dollars.  Our nation cannot afford to discourage giving at a time when charitable organizations are facing enormous financial challenges stemming from the economic downturn.

We are aware of two proposals that would affect the charitable deduction.  The Debt Reduction Task Force of the Bipartisan Policy Center has proposed replacing the deductions for mortgage interest and charitable contributions with 15 percent refundable credits that anyone who owns a home or gives to charity can claim. Alternatively, the co-chairs of the National Commission on Fiscal Responsibility and Reform, former Sen. Alan Simpson (R-WY) and Erskine Bowles, suggested allowing the tax break only for charitable contributions that exceed 2 percent of adjusted gross income.

In light of the current economic conditions and the drastic impact of the past few years on charitable giving, it is more important than ever to preserve the charitable deduction in its entirety.  The Giving USA Foundation recently reported that in 2008, the decline in total charitable giving was the greatest since the organization began tracking charitable donations in 1956. 2009 was just as devastating with some charities, after years of public service, closing their doors for good.

Studies indicate that donors give for many reasons-incentives such as tax deductions being among them. While Americans do not make charitable gifts only for tax reasons, tax incentives make more and bigger gifts possible.

Moreover, history and the actions of the federal government indicate that tax incentives do, in fact, affect charitable giving. During times of crisis, such as the natural disasters like Hurricane Katrina and the 2008 Midwest flooding, Congress regularly passes charitable giving incentives to make it easier for Americans to give donations and support to the nonprofits serving individuals, families and communities in need. More recently, the federal government encouraged charitable giving through tax deductions to help the nation respond to the devastation in Haiti.

As charities struggle to meet increased demands for their services and raise additional funds, we need to encourage all individuals, regardless of income and wealth, to be more charitable. Limiting the value of the charitable deduction does the exact opposite and would fundamentally alter the tradition of charitable giving that has made America one of the most generous nations in the world. [Discuss the potential impact on your own organization.]

For that reason, I oppose any deficit reduction proposals that would negatively impact charitable giving by reducing or eliminating the charitable deduction.

Sincerely,



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