The sweeping tax overhaul proposal in the U.S. House may be a boon for business with its rate cuts, but it could have devastating consequences on the nonprofits by lowering incentives for charitable giving, according to two influential Minnesota philanthropic councils.
The Minnesota Council of Nonprofits and the Minnesota Council on Foundations both came out forcefully Friday against the tax plan, which an Indiana University study said could result in a decline from $4.9 billion to $13.1 billion in charitable giving across the country.
While the tax plan by the Republican-led House would retain a deduction for charitable giving, it would nearly double the standard deduction from $6,350 to $12,000 for individuals and $12,700 to $24,000 for married couples.
That would remove a significant incentive to give and likely result in far fewer taxpayers itemizing charitable donations, said Bob Tracy, the Council on Foundation's director of public policy.
"Now, 35 percent of filers itemize and are able to use the current charitable giving tax deduction. Increasing the standard deduction means only 5 percent of filers will itemize," Tracy said.
On the other hand, U.S. Rep. Tom Emmer, R-Minn., said in a statement that the tax package promises an economic boost to help young and middle-class families — the people often helped by nonprofits — achieve the American dream.
"This is about pulling our nation out of the past eight years of dismal ... growth and boosting our economy to grow at a rate of 3-4 percent like we know it can," Emmer said.
Nonprofit leaders said a drop in charitable giving could ripple through Minnesota, where 12 percent of the workforce is employed by nonprofits. At the same time, budget and tax plans may cut government programs for needy populations, putting more pressure on nonprofits.