28% Cap on Donations Will Cripple Non-Profits

Last week myself and many other CEO’s from across our Nation visited Washington, DC to discuss the crippling effects that proposed legislation will have on non-profits if it moves forward.  I am referring to a Charitable Deduction Cap.  This idea was bounced around during the debt ceiling deal, and is now one of the many methods that Congress and the White House are considering for tax reform.

Let’s face it, America is broke.  The need for creating new revenue is a high priority, and at this point legislators look like they will do whatever it takes to create those revenues. Some new avenues for producing revenue are overdue and justified, some are misguided and undue.  The Obama administration and Congress have struck deals to both cut discretionary spending and increase taxes on the top 2% of wage earners, equaling over $2.5 trillion of deficit reduction over the past few years, yet voices on both sides of aisle are yelling for more.  Many proposals and arguments state that we must cut programs including those in social services, education, health and the military; others call for even greater increases in revenue.  The fact that charitable deduction caps are included in this call for revenue is what worries non-profits like the YMCA.

The proposal for a Charitable Deduction Cap goes like this: high wage earners normally receive 35 cents for each dollar donated, but if this proposal becomes law they will lose 15 cents for each dollar, giving them .28 cents for each dollar.  Given at face value, this does not seem like it would make a significant impact on non-profits, especially considering over 93% of all itemizing donors make less than the $250,000 threshold, however, these same folks also are responsible for over 35% of the total dollars donated (Forbes). While I understand the need to take a ‘balanced approach’ to our deficit woes, making sure to be wise about what spending cuts we make, I also strongly believe that it is in our nation’s best interest to incentivize charitable giving.

Non-profits like the Y, United Way, Salvation Army and countless others have served millions of people in dire straights and unfortunate circumstances–and they have created a great system of doing so. While government programs and funding can undoubtedly play key roles in helping our nation’s most vulnerable, these non-profits and social service organizations are specialized and dedicated to these efforts, and have been integrated into our communities in ways government programs often have not.  Organizations like the Y help develop the skills and opportunities required for the next generation to be come successful and valuable members of our society–without this, the cycle of poverty continues, our revenue bases dries up and society’s woes become greater.