At the heart of the GOP tax plan is a push toward simplification that could have unintended consequences, potentially hurting charities — particularly those that depend on donations from middle-class donors.
To fulfill a long-held promise to make taxes simpler, the plan would end itemization for most Americans who use it today, by increasing the standard deduction. About 30 percent of taxpayers who file returns currently itemize — and the prospect of that change has triggered a strong behind-the-scenes campaign from charities seeking to make sure the tax incentive continues to be used.
According to an Urban-Brookings Tax Policy Center analysis of a plan with similar elements, the 45 million households that would itemize deductions under the current rules in 2017 would drop to just 7 million.
Many people who no longer itemize would continue to give, and the charitable contribution deduction would still be available to the small fraction of people who do itemize — who would tend to be higher-income households. But charitable organizations are concerned that donations will drop. More than 80 percent of itemizers reported making charitable donations, compared with 44 percent of non-itemizers, according to an analysis by Indiana Universityresearchers commissioned by Independent Sector, a membership organization of nonprofits, foundations and corporations.
That study found that decreasing the top tax rate and increasing the standard deduction slightly less than the current proposal could cut charitable giving by up to $13.1 billion per year. That's a tiny percentage of the $373.3 billionthat was donated in the United States in 2015, according to the Giving USA Foundation, but the issue has become an important one for charities.
“We have spent an enormous amount of time up on the Hill, and we get back the talking point, 'Oh, don’t worry — we preserve the charitable deduction.' That makes it seems like many lawmakers don’t understand, themselves, what the ramifications of this legislation are,” said Steven Taylor, senior vice president at United Way Worldwide. “A lot of charities are coming to grips with the fact that there may come a point where individual charities would have to start having to come out in actual opposition to the tax reform bill — and no charities want to be put in that position.”
To fulfill a long-held promise to make taxes simpler, the plan would end itemization for most Americans who use it today, by increasing the standard deduction. About 30 percent of taxpayers who file returns currently itemize — and the prospect of that change has triggered a strong behind-the-scenes campaign from charities seeking to make sure the tax incentive continues to be used.
According to an Urban-Brookings Tax Policy Center analysis of a plan with similar elements, the 45 million households that would itemize deductions under the current rules in 2017 would drop to just 7 million.
Many people who no longer itemize would continue to give, and the charitable contribution deduction would still be available to the small fraction of people who do itemize — who would tend to be higher-income households. But charitable organizations are concerned that donations will drop. More than 80 percent of itemizers reported making charitable donations, compared with 44 percent of non-itemizers, according to an analysis by Indiana Universityresearchers commissioned by Independent Sector, a membership organization of nonprofits, foundations and corporations.
That study found that decreasing the top tax rate and increasing the standard deduction slightly less than the current proposal could cut charitable giving by up to $13.1 billion per year. That's a tiny percentage of the $373.3 billionthat was donated in the United States in 2015, according to the Giving USA Foundation, but the issue has become an important one for charities.
“We have spent an enormous amount of time up on the Hill, and we get back the talking point, 'Oh, don’t worry — we preserve the charitable deduction.' That makes it seems like many lawmakers don’t understand, themselves, what the ramifications of this legislation are,” said Steven Taylor, senior vice president at United Way Worldwide. “A lot of charities are coming to grips with the fact that there may come a point where individual charities would have to start having to come out in actual opposition to the tax reform bill — and no charities want to be put in that position.”