The following is an excerpt from an article posted in The Roanoke Times in Dec 2017:
“Hassan is the media relations and public affairs specialist at Islamic Relief USA, an Alexandria-based non-profit humanitarian and advocacy organization, that works in some 40 countries around the world, including the United States.
Regardless of whether the Senate or House tax cut bill, or some hybrid of both bills is adopted, there are some groups for whom the legislation is bound to have a deleterious effect.
One is non-profit organizations that rely on charitable giving from good-hearted people who want to make a difference to society … and also rely on a generous tax deduction as a result of their donations.
With these bills, there is a good chance, and actual studies, to suggest charitable giving will slip. The reason is pretty simple. Right now, most people who donate to charities and non-profit groups itemize their deductions in order to receive a percentage of their money back. But because the bills call for increasing the standard deduction, there will be less incentive for taxpayers to itemize their deductions.
The increase in the standard deduction is substantial. The Senate bill proposes increasing the standard deduction for individuals from $6,350 to $12,000, and for couples, the amount would go up from $12,700 to $24,000. Thus, this creates a tendency to donate less, since there’s no practical, and more importantly, financial incentive to do so. You’re already getting a bigger deduction without having to contribute some of your earnings.
So why donate, and go through the laborious paperwork of itemizing? Because a lot of money is at stake that humanitarian organizations, including Islamic Relief USA, depend on to do such things as feed the hungry, provide medical services, help the homeless, and provide the tools to stimulate economic and personal empowerment. In the Roanoke area, Islamic Relief USA helped fund programs, with the assistance of Share Our Strength anti-hunger organization, to fund healthy school lunch programs. It also has provided financial assistance to the United Way to help individuals suffering financial setbacks from becoming homeless.
Support for these programs in the future could be jeopardized. Indiana University Lilly School of Philanthropy predicted in a recent report that charitable giving could slip by $13 billion if the tax policy changes are adopted (https://philanthropy.iupui.edu/news-events/news-item/tax-policy-proposals-would-reduce-charitable-giving,-new-study-finds.html?id=227). And, the Tax Policy Center said the House bill would cause a $12 – $19 billion drop in charitable giving in 2018. This isn’t what my kids would call chump change (http://www.taxpolicycenter.org/briefing-book/how-might-tax-reforms-reduce-incentives-charitable-giving).
Even if one decides to itemize his or her taxes, the proposed legislation already puts many donors behind the proverbial eight ball because of lower marginal income tax rates. For example, if you’re a middle-class resident who made a $10,000 donation, you’d get back $2,500 in the form of lower taxes. However, under the proposed Senate bill, which calls for reducing the tax rate from 25 percent to 22 percent, that some donor would receive a $2,200 deduction. This is essentially another disincentive. Multiply that many times over among many residents and you could get a cumulative effect that is nothing short of devastating for charitable groups all over the world.
There are some who recognize the potential collateral damage that the tax cut legislation in both houses presents. One lawmaker, Sen. James Lankford of Oklahoma, has introduced the Universal Charitable Giving Bill, which would offer an additional deduction to donors to charities without having to itemize. It offers a deduction of about $2,100 to individuals and $4,200 for couples. Rep. Mark Walker of North Carolina has introduced sister legislation in the House.
The bills at least acknowledge the possible pitfalls, but then the question arises how much more revenue can the federal government forego due to tax cuts and deductions before starving much-needed funding for other essential services and programs millions of Americans count on? Questions of moral hazard always arise during debates and discussion of such heavy issues. We encourage both parties to keep in mind the vulnerable, the less well-off, the working poor, children born in disadvantaged households and senior citizens on fixed incomes when enacting major policy changes that would make bad or delicate situations worse.
That’s a skinny repeal we could all live without.”