Millions of Americans will participate in Giving Tuesday today. The global day of giving comes at a time when many families are planning their year-end donations to charities and nonprofits. More than $170 million will be raised worldwide on Giving Tuesday.
While you are considering which charity to support, Congress is moving toward reducing one of the major incentives for charitable giving: the charitable deduction. This will happen if Congress doubles the standard deduction as part of tax reform and makes it less advantageous to itemize tax returns. More than 31 million taxpayers, including 1.8 million in Florida, lower their income tax burden by deducting their annual donations to charities and non-profits.
To maintain charitable giving and increase the standard deduction, Congress should make the charitable deduction universal. If there is no financial benefit to itemized deductions, there is no personal financial benefit in donating to charity. An Indiana University study came to this conclusion and found that many donors will lose a major incentive to donate, which will reduce giving nationally by $13 billion.
United Way Suncoast and dozens of nonprofit social service organizations work with families in Tampa Bay who would benefit from tax reform that includes an expansion of the Child Tax Credit and increased eligibility for the Earned Income Tax Credit. These are ALICE families: Asset Limited, Income Constrained and Employed. United Way’s ALICE family studies have found that about 30 percent of families in Tampa Bay are above the poverty line but still struggling despite being employed. We work to help ALICE families become financially secure by using services like job training, financial coaching and youth programs.
We support tax reform that includes efforts to improve the long-term financial outlook of working families. The Child Tax Credit and EITC do this. They have been proven to lift children and families out of poverty. That alone is not enough to move ALICE families up the economic ladder. Encouraging charitable giving by companies and individuals is also necessary as it helps us to do the work that you expect of charities and nonprofits in our community.
The best way for Congress to maintain the incentive to donate while doubling the standard deduction is to make the charitable deduction universal. Without a universal charitable deduction, 28 million Americans would be taxed on their charitable giving. Making the charitable deduction available to standard deduction filers will lower families’ tax burdens and promote charitable giving.
It isn’t just social service organizations that would be negatively impacted if charitable giving becomes less appealing for taxpayers. Religious institutions could have their giving reduced by 4.7 percent, according to a study by Independent Sector, a nonprofit alliance.
Charitable giving is critically important in enabling local communities to meet local needs. As proposed, about 5 percent of taxpayers would itemize their deductions instead of using the new double standard deduction. That would make charitable giving financially beneficial only to the wealthiest taxpayers.
Florida is growing, and charities and nonprofits are asked to serve more people. Reducing the incentive to give will not benefit your church, your kid’s Little League, or your wallet. When you give, you are making a commitment to your community. We should encourage that by asking Congress to make the charitable deduction available to all taxpayers.
Suzanne McCormick is the president and CEO of United Way Suncoast, which serves Pinellas, Hillsborough, Manatee, DeSoto and Sarasota counties.