Should Sector Relinquish Charitable Tax Deduction as Act of National Leadership?

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July 8, 2011; Source: Los Angeles Times | NPQ has, of course, long been following the discourse about possible elimination of the charitable tax deduction.

Now in this op-ed from the Los Angeles Times, Alan Luks urges nonprofit leaders to take a leadership role in the country by giving up the charitable tax deduction – and urging other corporate entities to do the same. In this way charities would be acting as “the conscience of the nation,” which says Luks, is what the country expects of us.

Luks, who is the former director of Big Brothers Big Sisters of New York City, writes:

“The independent Congressional Budget Office recently reviewed 11 options for revising the income tax treatment of charitable giving, and it grouped them into four categories. All establish a floor below which contributions would not be deductible. One proposal retained tax deductibility only for donations exceeding $1,000 per couple or, alternatively, 2% of a person's adjusted gross income. Under this example, the report estimated that individuals who itemize deductions would pay $15.7 billion in additional taxes yearly to the government. But charitable agencies could experience a loss of up to $3 billion (1.5% of the more than $200 billion now given annually by individuals).

That loss should be accepted by charities as the cost of leadership needed by the country now.”

Where Luks’ proposal falls short is in his assumption that this collective act would embarrass corporations into following suit. That part of his argument beggars credibility. What do you think about this issue and nonprofits taking a more active role in tax policy generally?—Ruth McCambridge

  • R. Ruth Linden

    Given the wide range in size, assets, and donor bases of American nonprofits, in no way do I favor across-the-board elimination of tax deductions for donations. Nor do I view nonprofit support for such a proposal as “taking a leadership role in the country.” That would be deferring to a double standard when we consider the multifarious legal and illegal ways that for-profit corporations get away with paying little-to-no income tax.

    Imagine the differential effects on a nonprofit with annual assets of $13.42 million (Big Brothers and Big Sisters of New York City, 2010, per Guidestar, of which Luks, the op ed’s author, was formerly director) and the nonprofit of which I am a director, whose annual assets in 2009 were $1.74 million (Center for Early Intervention on Deafness, Berkeley, CA, 2009, per Guidestar). The situations are uncomparable.

  • Heather Iliff

    If we are going to change the deductabilty of charitable donations, I would make the truly altruistic donations tax-deductible, and the ones with self-interest less so. If you are giving a donation to a school where your child attends, you get a benefit from that. Or, you give money to your own church, you benefit from the services. Or, to your own alma mater, you benefit from the school’s increased stature. That is why the vast majority of philanthropy flows to wealthy institutions and wealthier zip codes.

    I think we should keep or even increase the tax deduction to causes for the poor and disadvangaged, where the individual giving the gift has zero self-interest.

  • Lin

    Let’s not fall into the trap of infighting about whose nonprofit is more worthy. I work with an organization that serves people living in material poverty, and often direct my own donations to such causes. But do I want to see arts and education crumble, for example? No! We need to focus on the corporations that are avoiding tax responsibilities, as they lay a heavy burden on others. We must stand together to oppose reductions in charitable giving deductions to all qualified nonprofits.