Op-Ed: Why Nonprofits Should Support Capping Deductions

From Common Good Vermont:

Thanks to Andy Robinson for sharing his views on this issue. In a recent email, Andy added:

“I hasten to acknowledge that many smart, thoughtful people disagree with me, so let’s have the debate. Feel free to share this link and post comments on the site. As the Vermont Senate considers this proposal, make your opinion heard. From the responses I’ve received so far — including several personal emails — it appears that nonprofit leaders have a wide range of reactions, ranging from strong support to strong opposition. I encourage us to be cautious about representing any one view as a consensus within the nonprofit sector.”

Every year about this time, nonprofit leaders converge on the Statehouse in Montpelier to advocate for policies and funding to support their initiatives. As a $4 billion industry that employs 19% of the state’s workforce, Vermont nonprofits have an essential role in shaping public policy.

Currently the legislature is considering a limit or “cap” on tax deductions – including charitable deductions – to raise more revenue. Because these deductions provide an incentive for giving, many nonprofit leaders fear that scaling them back will make it harder to raise money, and they are mobilizing to resist this change in the tax code.

As we consider the broader implications of tax reform and government spending, I am concerned that my nonprofit colleagues are overreacting or – even worse – responding to the wrong threat.

First, a few facts about charitable giving. Seventy percent of American households contribute to nonprofits; only one-third of taxpayers itemize their deductions In other words, a majority of donors currently get no tax benefit from their giving, and yet they continue to give.

If the charitable deduction is reduced, experts project that individual donations will decline by one to three percent: hardly worthy of the panic we see in the nonprofit community.

Why can’t we accept this loss and say, “We are willing to do our part” – especially if increased revenue helps to protect government programs that serve our nonprofit clients and customers? If we oppose program cuts, then we must give decision-makers the tools to raise enough revenue to fund these programs. A cap in deductions is one of these tools.

The larger issue is the demonization of government and the culture of tax avoidance. For the past thirty-five years, we’ve heard an insistent drumbeat that government is bad, and therefore paying taxes is a waste of money. A recent Vice Presidential candidate called taxes “unpatriotic.”

For the full article please visit: http://blog.commongoodvt.org/2015/04/op-ed-why-nonprofits-should-support-capping-deductions-including-the-charitable-deduction

Davis & Hodgdon Associates CPAs has been assisting individuals, businesses, and nonprofits with tax, accounting, and financial planning services in the Burlington Vermont Metro area for more than 20 years. If you have any questions or concerns please feel free to call 802.878.1963 or email [email protected].

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