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INDEPENDENT SECTOR
is a coalition of more than 700 national organizations and corporations representing the vast diversity of the nonprofit sector and the field of philanthropy. Its members include many of the nation's most prominent nonprofit organizations, leading foundations, and Fortune 500 corporations with strong commitments to community involvement. The network represents millions of volunteers, donors, and people served in communities around the world.
INDEPENDENT SECTOR members work globally and locally in human services, education, religion, the arts, research, youth development, health care, advocacy, democracy, and many other areas. No other organization represents such a broad range of charitable organizations and activities.
INDEPENDENT SECTOR strongly commends President Bush for proposing enactment of a charitable contribution deduction for the more than 80 million Americans who use the standard deduction in computing their income tax liability. Under the President's proposal,
nonitemizers would be able to deduct their charitable contributions up to a ceiling equal to the amount of the standard
deduction.1 In non-technical terms, the President's proposal would make charitable contributions tax deductible for all Americans - not just for the 30% of taxpayers (generally higher income) who itemize their deductions. Congressman Phil Crane will shortly introduce legislation to enact the President's proposed
nonitemizer deduction.
INDEPENDENT SECTOR strongly urges Congress to enact the President's proposal, as embodied in Congressman Crane's legislation, as part of this year's first piece of tax legislation. We attach a list of more than 500 charitable organizations - including many of the largest national charities - which have individually joined in support of this position
(Attachment A).
America depends on a strong charitable sector, and America's charities depend on a strong base of charitable giving.
INDEPENDENT SECTOR believes that the following principles state a powerful case for the importance of a strong charitable sector and a strong tradition of charitable giving as cornerstones of our free society.
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A strong and healthy independent sector is vital to our democracy, our quality of life and our free society. The independent (voluntary, charitable, nonprofit) sector nurtures and sustains two fundamental prerequisites for a free society: an engaged and public-spirited citizenry and a rich network of autonomous communities working to advance the public good. Through our participation in and support of the organizations of the independent sector, we give life to some of our most cherished values: freedom of speech, association, and religion; pluralism; the responsibilities of citizenship; the dignity and worth of each and every individual; justice; and, building community.
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Within our three-sector society, a strong independent sector, a healthy business sector and an effective governmental sector all play critical roles. The independent sector sustains a broad range of vital public-benefit activities. Many of these activities are undertaken in partnership with government and business, and the independent sector also plays a role in holding business and government accountable. Through the independent sector, Americans both help to shape government policy and support private initiatives for the public good that complement the essential work of government. Our three-sector society works best when each sector understands, respects, and supports the vital functions of the other sectors.
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The independent sector depends on a strong base of charitable giving. Donated resources allow the organizations of the independent sector to sustain public-benefit activities. Without a strong base of charitable support, the independent sector could not perform these vital roles. While earned income and government support are also important revenue sources to nonprofit organizations, donated resources often form the core support of the organizations and allow them the independence so vital to performing their role in society. Thus, society has a fundamental interest in encouraging charitable support.
Tax policy should strongly encourage giving by all Americans. The tax code is the most powerful tool available to the federal government for sending the message that we as Americans highly value and strongly support charitable giving. But today that message goes out only to the 30% of taxpayers who itemize their deductions. The tens of millions of hard-working low- and middle-income Americans who claim the standard deduction do not receive any recognition or encouragement through the tax code for their charitable giving. Intended or not, the message they receive from current law is that their charitable giving is not worth encouraging.
At a time when the need for stronger civic engagement could not be clearer, this is a message we simply cannot afford to keep sending. On the contrary, we need to democratize the charitable contribution deduction by making it available to all Americans. We need to send a clear and unequivocal message that charitable giving is an important responsibility of citizenship - for all Americans. Enacting the charitable deduction for
nonitemizers is the only real way for the federal government to send this message.
The nonitemizer deduction would strongly encourage more gifts and new
givers. Beyond its powerful symbolic importance, the
nonitemizer deduction would provide a strong stimulus for increased giving and new givers. In this regard, we attach a report prepared by the National Economic Consulting Division of PricewaterhouseCoopers summarizing the results of an econometric analysis of the effect of the
nonitemizer deduction on charitable giving (see
Attachment B).
PricewaterhouseCoopers concludes that had the nonitemizer deduction, as proposed by President Bush, been in effect in 2000, total charitable giving would have increased by $14.6 billion - an increase of 11.2%.
Perhaps even more important, PricewaterhouseCoopers concludes that the
nonitemizer deduction would have stimulated charitable gifts by 11 million Americans who would have otherwise given nothing. The long-term importance of encouraging these millions of Americans to begin to develop the habit of giving surely dwarfs the immediate increase in charitable giving, as important as that increase would be.
Two other perspectives strongly confirm the importance of the
nonitemizer deduction in encouraging increased giving. First, in 1981, Congress enacted the
nonitemizer deduction on a 5-year trial basis from 1982 through 1986. The deduction was phased in gradually, and was fully in effect only in 1986. Significantly, between 1985, when
nonitemizers were allowed to deduct only 50% of their contributions, and 1986 when
nonitemizer gifts were fully deductible, total giving by
nonitemizers increased by 40% according to IRS data. Second,
INDEPENDENT SECTOR
research, summarized in Attachment
C, indicate that in every income category, individuals who itemize their deductions contribute significantly more to charity than do
nonitemizers with the same income.
The nonitemizer deduction would provide important tax relief to low- and middle-income Americans. In recent months, broad consensus has emerged on the importance of enacting a significant, broad-based tax cut. Major tax relief for America's hard working low- and middle-income families must surely be a part of any such legislation. The
nonitemizer deduction is an extremely attractive means of providing part of this needed tax relief since the deduction would achieve three important social goals rather than only one - it would reduce taxes, target those tax cuts to low- and middle-income taxpayers, and encourage increased charitable giving.
The nonitemizer deduction would provide much-needed funding to thousands of community-based and religious organizations that are addressing America's most urgent social concerns.
Significantly over half of all contributions by nonitemizers go to religious and human service organizations. Enacting the
nonitemizer deduction would, as noted above, substantially increase these contributions. Thus, the
nonitemizer deduction would directly advance a policy objective championed by President Bush and embraced by leaders across the political spectrum - increasing the resources available to the thousands of community-based organizations, religious and secular, which are on the front lines of efforts to help our neediest citizens. To be more concrete, if the
nonitemizer deduction is enacted, community-based organizations will be able to provide dramatically more child care, mentoring, job training, drug rehabilitation, elder care, and a host of other vital social services. No other measure could do more to strengthen America's vital infrastructure of community-based service organizations.
The nonitemizer deduction would be simple for taxpayers and easy for the IRS to administer. It is hard to imagine a tax provision easier to explain. The message to
nonitemizers would be simple and clear: before you could not deduct your contributions - now you can. The deduction would require only a single additional line on the Form 1040. The IRS has already developed -- in the course of administering the existing charitable deduction for itemizers -- clear, user-friendly instructions explaining what types of contributions are and are not deductible.
Moreover, rules are already in place that require charities to provide written receipts for contributions of $250 or more and to advise donors when they must reduce their charitable deduction because they have received a return benefit from the charity. These and other existing safeguards have effectively ensured the integrity of the existing charitable contribution deduction for itemizers, who, because of their larger average level of giving, account for 80% of all charitable contributions. These existing safeguards will likewise ensure the integrity of the
nonitemizer deduction.
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In closing, we reiterate the key principles that undergird INDEPENDENT
SECTOR's support for the nonitemizer deduction: America's health as a free, democratic society depends on a strong charitable sector, and America's charities depend on a strong base of charitable giving. The
nonitemizer deduction would powerfully encourage that charitable giving by all Americans. We applaud President Bush and Congressman Crane for their leadership on this issue, commend the many other members of Congress who have supported this proposal, and call on Congress to enact it now.
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Copyright ©
2002 Independent Sector. All Rights Reserved.
