(WASHINGTON, March 26, 2009) -- Independent Sector today issued the following statement.

President Obama’s proposal to raise the funds necessary to implement health care reforms by reducing the tax incentives for charitable contributions by taxpayers earning more than $250,000 presents a Solomon’s choice for the charitable community that will not be resolved easily. Experts disagree on the extent to which tax incentives affect the total contributions made by taxpayers, but they all agree that this change would reduce charitable giving, with estimates ranging from $1.63 billion to over $7 billion per year. These contributions are needed more than ever in these difficult economic times. At the same time, charitable organizations face enormous challenges in finding resources to pay the rising costs of health care for the employees who are essential to carrying our their work for communities, and they see first hand the consequences to people coming to their organizations for services who are unable to afford health care coverage.

For nearly a century, our nation’s tax system has strongly encouraged Americans to give back to their communities by providing tax deductions for contributions to tax-exempt organizations. Independent Sector has long held that the amounts an individual voluntarily commits to serve the public good should not be part of their taxable income, and we have supported efforts to extend tax deductions for charitable giving to all taxpayers, not just those who itemize their deductions. We also believe it is appropriate, within the federal income tax’s progressive rate structure, to give stronger incentives to individuals of substantial means to encourage them to meet their special leadership responsibility in giving back to the community. These policies have helped fuel a strong tradition of giving that has strengthened our educational system, broadened access to health and human services, fostered an appreciation for our history and cultural heritage, advanced scientific and medical research, and supported a wide variety of other programs vital to the health of communities throughout our nation and the world.

While there are many reasons Americans choose to make charitable contributions, research has shown that changes in tax benefits do have an impact on when and how much an individual or family contributes to charitable organizations. IRS statistics for 2006 show that the 49 million Americans who itemized their tax deductions accounted for $196.8 billion in charitable contributions -- 88% of the total $222.9 billion contributed to charitable organizations by living individuals that year. Economic conditions, such as stock market prices, personal income, and concerns about personal financial stability -- all of which are at play in the current economic crisis -- will also have an impact on the amount individuals choose to contribute to charity. In the end, this proposed policy change, combined with the current economic crisis, would diminish the flow of dollars to many charitable organizations leaving many of our most vulnerable populations on the losing end.

Health care costs have become an increasing concern in the nonprofit community. In 2005 (the latest year for which data are available), nonprofits paid over $48 billion for employee health care coverage and related benefits (not including pension plan contributions or payroll taxes) -- over 4.6% of their total expenditures. Since then, the cost of health care coverage has skyrocketed and nonprofits now face difficult decisions about whether to cut benefits for employees and risk losing qualified staff, or cut staff positions, both of which would diminish the programs they provide to communities. Nonprofits, particularly those that deliver health and human services, also incur substantial costs associated with serving the over 43 million Americans who do not have health care coverage, as well as millions of other individuals and families who are postponing important health care in these difficult economic times.

We are living in extraordinary times, and we believe it is important to work closely with the administration and the Congress to find workable solutions to the Solomon’s choices that lie ahead. It is essential that the administration and Congress move forward on the health care challenges facing our nation, and explore all of the available options for addressing the costs of health care reform. It is also imperative that the administration and Congress preserve these and other strong incentives to encourage Americans to give back to their communities, particularly those of substantial means who have both the capacity and the responsibility to give back to communities.

Independent Sector is a nonprofit, nonpartisan coalition of approximately 550 charities, foundations, and corporate giving programs, collectively representing tens of thousands of charitable groups in every state across the nation. Its mission is to advance the common good by leading, strengthening, and mobilizing the nonprofit and philanthropic community.