Dear Mr. President and Members of Congress:
We, the undersigned, write to express our concern that ongoing discussions in Washington to avoid the so-called ‘fiscal cliff’ may ultimately produce policies that disproportionately impact our most vulnerable communities. We lead nonprofit organizations whose tens of millions of employees and volunteers are working to improve lives in every community across America.
In particular, we are deeply troubled by reports that an aggregate cap, whether a dollar-limit or percentage, on the value of the charitable deduction is under consideration as a potential short-term revenue solution during the lame duck session. Since 1917, our nation’s tax system has strongly encouraged Americans to give back to their communities, and the broad concept of charity on which the deduction is based has given rise to a diverse and pluralistic set of organizations all dedicated to the public good.
Research has suggested that a cap on the charitable deduction could reduce charitable giving by as much as $7 billion a year; this would come on top of the nearly $20 billion annual decrease in giving since the economic downturn began in 2007. Federal and state budget cuts have further overburdened and diminished the capacity of nonprofits and disproportionately affected those least able to help themselves. It is simply untenable to ask them to now endure the inevitable reductions in nonprofit programs and services that will be driven by a cap on the charitable deduction.
Congress has, in fact, long recognized the connection between the tax code and giving to charitable organizations. In the days following the devastating January 2010 earthquake in Haiti, legislation was enacted allowing taxpayers to claim a 2009 deduction for donations made to Haiti relief efforts between the date of the earthquake and March 1, 2010. Similar extensions were enacted following the Southeast Asia tsunami of 2004, Hurricane Katrina in 2005, and storms in the American Midwest in 2008.
Congress took these steps out of recognition that the deduction does, in fact, encourage people to give to charity. We know that more than 80 percent of the 46 million Americans who itemized their tax returns in 2009 claimed the charitable deduction, and that these individuals and families, who represent barely one quarter of all taxpayers, were responsible for more than 76 percent of individual contributions to charitable organizations.
Moreover, the power of the incentive can be seen in the timing of charitable gifts. Between 2003 and 2009, charitable organizations in the U.S. received $281 million in online donations. Remarkably, more than 22 percent of those donations were made on December 30 and 31 each year, underscoring the extent to which tax implications guide donor behavior.
The charitable deduction is also a fair and efficient way for the government to spur investment in communities. The current tax code treats every taxpayer who claims the deduction equitably; regardless of the rate at which their income is taxed, individuals are not required to pay taxes on the portion of their earnings donated to charity. When an individual in the highest tax bracket donates $1,000 to charity, the government foregoes $350 in tax revenue, but communities benefit from the entire $1,000 gift. The government is unlikely to find another vehicle that leverages, at a nearly 3-to-1 ratio, private spending to provide educational and economic opportunities for families in need, alleviate poverty and suffering at home and abroad, assist victims of disaster, enhance the cultural and spiritual development of individuals and communities, and foster worldwide appreciation for the democratic values of justice and individual liberty that are part of the American character.
Unlike other deductions, which subsidize personal spending that benefits the individual taxpayer, the charitable deduction actually encourages taxpayers to give away income in order to benefit our communities. The tax deduction for charitable giving is not a path to amassing greater personal wealth or accumulating tangible personal assets. In fact, it is the beneficiaries of contributions made by Americans of all incomes, rather than the taxpayer, who will pay the highest price in a loss of vital services if Congress acts to limit the charitable deduction.
We are also greatly concerned that the impending automatic, across-the-board spending cuts and proposed changes to entitlement programs being discussed could undermine the social safety net and cause added hardship for low-income families. We urge you to avoid cuts in programs that help meet basic needs and provide educational and employment opportunities. Increased poverty must not be an unintended consequence of avoiding the fiscal cliff.
In this critical time we acknowledge and support the need to put our nation on a more sustainable fiscal path, but urge you to protect programs that assist people with low incomes and preserve the charitable deduction’s powerful incentive for giving. Taken together, these steps will help ensure that basic human needs are being met in communities across America.
Thank you for your leadership and your consideration of these vital issues.
More than 940 nonprofits and foundations (See Full List)