June 11, 2017; MiBiz (Michigan Business News)
Language has been introduced in tax proposals currently under consideration in the Michigan state legislature that would restore an individual or family credit for donations to charitable organizations. (Notice this makes it available to even non-itemizers.)
If passed, a set of bills would restore a previous credit eliminated in 2011 as a piece of balancing the state’s budget. What Michigan officials seem to have learned is that by ending a relatively small credit funded by the state, Michigan lost out in leveraging private dollars that helped fill community gaps in the human safety net, ultimately costing more dollars for the state to provide needed services. Rob Collier, president and CEO of the Council for Michigan Foundations, estimates the return on investment for giving incentives to be about $3 for every state dollar spent.
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Of perhaps even more importance, community foundations applauded the proposed return of a tool that actually helped shaped human behavior in developing giving patterns, particularly for lower income taxpayers. The tax credits were attributed with rising giving practices of lower amount gifts, and therefore not just a tax benefit for the top 1% of wealthy donors. People who make charitable donations at younger ages, even at lower levels, are thought to become lifelong charitable donors, increasing capacity in their communities for the long term.
Individual donors benefitted, as well. Giving a small reward for monetary gifts seems like a worthwhile investment to reap the benefits of the greater good and to promote community responsibility. When the Michigan credit was eliminated, a significant drop in even $200 donations was felt. Individuals like to do good, and recognition of that can go a long way.
So, if legislators see the value in it, community foundations encourage it, and individuals change their behavior positively because of it, it’s a no-brainer, right? Well, not so fast. Sadly, state budgets that are determined on an annual or even biennial cycle promote short-term thinking and sometimes even act against long-term gain. To add even more pressure to this dilemma, proposed tax changes at the federal level may even disincentivize charitable giving at all levels, a reminder that all politics is local. Especially now, local problem-solving may be the sector’s best shot at maintaining needed government and nonprofit services that people rely on and want. For that, we applaud Michigan’s reconsideration of this measure and await its eventual outcome.— Jeannie Fox