In an op-ed published by The Chronicle of Philanthropy, Jack Salmon, Philanthropy Roundtable’s director of policy research, examines the potential consequences to the philanthropic sector when the 2017 Tax Cuts and Jobs Act expires at the end of next year. Salmon says while policymakers debate proposals like a wealth tax, regulations on donor-advised funds and changes to the charitable deduction to generate revenue, they should not ignore the unintended consequences of these policy changes on charitable giving.
Below are excerpts from the article “Expiring Tax Breaks, Charitable Giving and What’s at Stake for Philanthropy”:
“Government leaders, economists, and tax policy experts are already debating what the nation’s tax code will look like when the 2017 Tax Cuts and Jobs Act expires at the end of next year. Lost in the conversation, however, are the potential consequences for charitable giving.”
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“Additionally, by lowering the tax burden for most Americans, the tax legislation benefited philanthropy more broadly. That’s because a fundamental link exists between tax policy and charitable giving. A thriving economy translates to increased economic activity and disposable income, which fuels charitable generosity.
“Studies show a one percentage point increase in marginal tax rates can lead to a nearly 0.8 percent decrease in gross domestic product. With charitable donations stuck at around 2 percent of GDP for several decades, any increase in taxes stemming from the expiring 2017 tax law could precipitate a significant decline in giving as economic activity slows and incomes fall.
“The make-up of the next presidential administration could have a significant effect on what new tax legislation looks like next year. As a new Philanthropy Roundtable policy brief lays out, several tax changes under consideration by the Biden administration have the potential to inadvertently harm charitable giving. These include a proposed wealth tax, regulations on donor-advised funds, and changes to the charitable deduction.”
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“The tax code is a complex web, and its effect on philanthropy is multifaceted. As policymakers navigate potential changes to the tax code, they need to consider the unintended consequences on charitable giving. A vibrant nonprofit world provides essential services and innovation often beyond the reach of government. Weakening it by inadvertently reducing donations would be a significant loss for millions of Americans.”
To read the complete article, please visit The Chronicle of Philanthropy.
