Nonprofits across the country, including key institutions in Boston, are pressing lawmakers in Washington to preserve tax breaks for charitable giving, as they wrestle with negotiations over the fiscal cliff.
In a concentrated lobbying effort, hundreds of nonprofits sent representatives to talk to members of Congress this week, cautioning against doing anything that would take away or limit charitable deductions. Republican and Democratic leaders have indicated they would consider raising revenue by limiting tax deductions, but nonprofits argue the charitable deductions are a powerful incentive for people to donate.
“The evidence is overwhelming that tax benefits matter hugely to people,” said Paul Grogan, chief executive of the Boston Foundation, a large community nonprofit that raises as much as $100 million annually. Tampering with the charitable deduction, he said, “is a crap shoot with something very precious.”
The Boston Foundation was among those lobbying leaders this week as part of the Charitable Giving Coalition made up of groups ranging from the United Way to Harvard University, Boston College, and the Huntington Theatre Co. locally.
Under current law, when people in the highest tax bracket give $1,000 to charity, they’re able to claim $350 of that as a tax deduction. (In the 15 percent tax bracket, it’s a $150 deduction.) By some estimates, giving could drop by as much as $10 billion if high earners lose the deduction.
Universities, arts institutions, human services groups, and churches all depend heavily on donations from individuals, who gave $218 billion in 2011, more than any other source of funds, according to the Giving USA Foundation.
Some Republicans, including former presidential candidate Mitt Romney, have called for capping tax deductions, perhaps at $25,000 per family, in order to raise tax revenue. But of the three major deduction areas, home mortgage interest, state and local taxes, and charitable donations, the third is most vulnerable, nonprofit leaders say, and likely to be shortchanged. It is also the only one that is an incentive to give money away to help others.
“We see the immense value in the charitable gift deduction. It has really come to make a lot of things possible in this country,’’ said Jim Husson, senior vice president for university advancement at Boston College. He was in Washington Wednesday meeting with staff from the Massachusetts congressional delegation, as were other nonprofit representatives.
“There’s a high level of support” for preserving the deduction among the Bay State delegation, Husson said. But there was plenty of caution in the words of support. “We’re in a very unpredictable political environment right now,’’ he said.
Washington is scrambling to negotiate ways to avoid the so-called fiscal cliff, a combination of across-the-board tax increases and spending cuts that are scheduled to take effect Jan. 1. Economists have warned that the country could fall back into a recession next year if leaders don’t figure out the right mix of tax hikes and cuts.
President Obama is pushing for higher tax rates on the wealthiest 2 percent of Americans and has argued that simply limiting itemized deductions won’t work. According to the White House blog detailing his math, a $25,000 deduction cap would eliminate any charitable deduction incentive for 97 percent of the top 1 percent earners. That could reduce giving by at least $10 billion per year under the Congressional Budget Office’s assumptions.
Losing that much charitable money could, from the perspective of policy makers, come back to haunt them in the form of social service needs going unmet, and forcing the government to pick up the slack.
“Even a small change in it means billions of dollars,’’ said Michael Nilsen, spokesman for the Association of Fundraising Professionals, an Arlington, Va., group that helped lead the coalition in its meetings with lawmakers.
Grogan, of the Boston Foundation, brings the issue home for Boston. “Think of your iconic Boston institutions — universities, cultural, health care,’’ he said. “I don’t know what Boston would be like if charitable deductions disappeared. This is an extremely valuable part of our society.”