A Fundraiser’s Take On Incentives For Giving

Much has been written and said recently about reforming the federal tax system. This is not a new issue but many people in the not-for-profit sector are concerned with the number of new proposals that would impact incentives for giving.

For the record, I love America and philanthropy and I think Congress acted in the national interest when it:

  • made the charitable deduction the first amendment in 1917 to the income tax it enacted in 1913,
  • codified charitable trusts and gift annuities in 1969 and protected gift annuities 25 years later, and
  • reduced the impact of the estate tax steadily during the last three decades, a tariff which was generally regarded as confiscatory up until then.

Thus, I would like to see tax incentives for giving preserved and believe the third sector should engage in informed debate about how best to do that in the context of fiscal responsibility.

However, I am dismayed by some of the recent commentary and advocacy from the not-for-profit community that I believe seriously undermines our credibility in two ways: first, by blithely ignoring relevant facts and making spurious and/or illogical arguments, and, second, by retreating into pure self-interest.

Several items in the Chronicle of Philanthropy of late illustrate the former. Possibly thinking a good offense is the best defense of the charitable deduction, arguments were made for extending it.

In one, a foundation executive notes that two thirds of Americans don’t itemize on their tax returns and thus are not entitled to the ‘robust tax subsidy’ provided by the charitable deduction. In another, an accounting professor further laments that lower income Americans who do itemize are penalized because their lower tax rate does not provide as large a deduction as that for upper income itemizers.

Fortunately a number of folks responded to these statements by pointing out that the standard deduction does include recognition of charitable giving and in many cases is very generous.

And, I am not sure how one can argue for a progressive income tax on the one hand and decry its negative impact on deductions at lower brackets.

Now, to the second point, while a few folks have indeed argued for engaging in discussion about alternative approaches, for the most part not-for-profit leaders have acted like the homeowner who believes in rehabilitation but opposes rezoning to allow a halfway house in the neighborhood – often called NIMBYs (not in my back yard).

Those leaders who ignore all other issues and steadfastly argue for the status quo (“If it ain’t broke don’t fix it,” said one) do a disservice to a noble cause.