United Way of Massachusetts Bay and Merrimack Valley, the Massachusetts Nonprofit Network and Catholic Charities of Boston today issued the following joint statement outlining their concerns about the impact of increasing the federal standard deduction on charitable giving:
“The Tax Reform legislation passed by the United States Senate, and by the US House of Representatives, has the potential to significantly harm the ability of nonprofit organizations to help people in need, both in Massachusetts and across the country. On behalf of the children, families and communities we serve, today we are speaking out about the ramifications of the tax proposal on the nonprofit sector, specifically the elimination of the charitable deduction for 31 million middle- and upper-middle income taxpayers.
“Currently, the charitable tax deduction is available to taxpayers who itemize, about 30% of taxpayers, or about 45 million taxpayers. Of the 45 million taxpayers who itemize, 36 million claim the charitable deduction, which accounts for an estimated 82% of charitable giving. The proposal would decrease the incentive to itemize by increasing the standard deduction, and 31 million taxpayers will lose the ability to claim this deduction. Studies suggest that this will result in about a $13 billion reduction in gifts to the charitable sector. These donors often give to humanitarian, social service and disaster relief organizations.
“The direct impact on nonprofits in Massachusetts could be devastating. In Massachusetts, roughly 1 million donors (nearly a third of all Massachusetts filers) claimed the charitable deduction, accounting for $5.5 billion dollars. A 5% loss resulting from tax reform would mean $275 million fewer dollars to fund private food banks, homeless or domestic violence shelters, provide day care, or job training.
“A drop in giving of this magnitude would have disastrous consequences. It would mean large cuts to services that people depend upon. It would put hundreds if not thousands of small nonprofits across the state out of business. And it would jeopardize the financial health of medium- and large-sized nonprofits, threatening their ability to deliver services.
“In addition, 20% of donors who would be eligible for the higher standard deduction earn an income of $200,000 or more. A national study released in 2016 asked philanthropists, whose incomes were $200,000 or more, whether their giving habits would change if the charitable giving deduction were eliminated. Nearly half (49%) indicated that they would decrease their giving, and 20% indicated that their contributions would ‘dramatically decrease.’
“There is unanimous agreement among academics and economists that charitable tax incentives enable people to give more. While any individual person has a variety of motives for giving, the century-old policy of exempting charitable donations from taxes significantly increases charitable giving. Claims that the final tax reform legislation will increase charitable giving are unsupported by any fact-based analysis.
“We are not optimistic that the compromise bill will differ significantly from what has been passed, but we will continue to look for other avenues to enact a universal “above-the-line” charitable deduction. We are deeply concerned for the millions of people in need in our communities and across the country who rely on private funding for critical early education, out-of-school time programs and organizations that provide pathways out of poverty.”
Michael K. Durkin, President and CEO, United Way of Massachusetts Bay and Merrimack Valley
Jim Klocke, CEO, Massachusetts Nonprofit Network
Deborah Rambo, President and CEO, Catholic Charities of Boston
For more information, contact:
Brigid Boyd, United Way
Direct: 617-624-8252 | Cell: 339-236-1161
Fernando Martinez,Massachusetts Nonprofit Network
Kathryn Dunford, Catholic Charities of Boston