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Make the Pie Bigger, Not Smaller: Support Non-itemized Charitable Giving Deduction

by Jennifer Gray

MANP joins its national counterpart, the National Council of Nonprofits, in supporting a non-itemized charitable giving deduction.

Congress is considering comprehensive tax reform. As part of that conversation, it should secure adequate resources to fund essential and effective programs and obligations, promote economic growth, and ensure that the net effect of tax-law changes strengthen, and do not undermine, the ability of charitable nonprofits to serve their communities.

Promoting giving to the work of charitable nonprofits is a bipartisan commitment to communities and constituents.

  • All Mainers rely on charitable nonprofits.
  • Nonprofits rely on the current charitable giving incentive to generate the necessary funds to pay for the delivery of existing services and programs.
  • Nonprofits use private charitable contributions to provide essential services such as food, education, health care, spiritual development, job training, youth programs, arts and culture, child care, services for seniors, affordable housing, and assistance for victims of domestic violence.

The Challenge

  • 30% of Americans itemize their tax deductions. Leading tax reform plans call for reducing tax rates and significantly increasing the standard deduction. While based in policy goals, these changes could add up to reduced individual support for the work of charitable nonprofits in communities.
  • Studies estimate that only about 5 percent of taxpayers would itemize their deductions when these two changes in tax law are factored in. This would mean that 95% of Americans would have no tax incentive to make charitable contributions.
  • Researchers estimate that these reforms would lead to significantly less charitable giving than our current tax system. The projections for reductions in charitable contributions range from $13.1 billion per year (Indiana University) to a range of $13.5 billion to $26.1 billion per year (Tax Policy Center).

Maine Impacts

The nonprofit community plays a critical part in Maine’s economy and communities. As noted in our biennial report Adding Up Impact:  Maine’s Nonprofits at Work (February 2017):

  • Maine’s future prosperity will undoubtedly depend on advancing innovative solutions to address community challenges, connecting people to opportunities, and strengthening our social fabric through broader civic engagement.
  • Nonprofits promote the values and ideals that create and support our quality of life; they touch the lives of each and every Maine resident.
  • They educate and care for our children, protect our natural environment, provide services for our most vulnerable citizens, offer a wide range of cultural opportunities, create affordable housing, support economic development and provide health care for our citizens.
  • They also create jobs, develop community leaders, and invest significant financial and human resources in communities throughout the state.

Not only are Maine nonprofits doing important work in our communities, but nonprofits are also important economic contributors. Just look at the numbers:  1 in 6 Maine workers is employed by a Maine nonprofit (that’s over 95,000 jobs!). A dramatic decrease in charitable giving in Maine would significantly threaten the work of nonprofits in Maine communities as well as the economic benefit they provide.

A Solution: Non-itemized Deduction

As part of tax reform, Congress should enhance, rather than reduce, incentives for charitable giving. Congress can expand the incentive for giving back to communities by making deductions universally available to all Americans through a non-itemized deduction for charitable contributions. The addition of a non-itemized deduction would help overcome the significant decrease in charitable giving that most economists predict will otherwise occur as the number of itemizers decreases.

Extending the charitable deduction to all taxpayers—regardless of whether they itemize or take the standard deduction—would not only cancel out the negative effects on giving, but it would increase charitable dollars going to strengthen and build communities.

Take Action

Contact our congressional delegation and urge them to support the universal/non-itemized deduction that provides a tax incentive for all Americans:

  • Congresswoman Chellie Pingree (207-774-5019 or email)
  • Congressman Bruce Poliquin (207-784-0768 or email)
  • Senator Susan Collins (207-945-0417 or email)
  • Senator Angus King (207-883-1588 or email)

Attend

Are you interested in tax policy? Or do you think you should be? Join us at our Nonprofits Talking Taxes event with Kim Klein, a national  tax policy expert, in  Portland on Oct. 25. 

 

Position content based on “Promoting Charitable Giving in Tax Reform,” by the National Council of Nonprofits.

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