GOP lawmakers have proposed a tax overhaul that could double the standard deduction for taxpayers in an effort to simplify the filing process. But a simpler tax form could hurt a number of local nonprofits.
Both the U.S. House and Senate are proposing tax overhauls, and both plans include the doubling of the standard deduction – but there is a tradeoff.
“Unfortunately the downside of that is that we would go from 30 percent of taxpayers itemizing down to 5 percent of taxpayers itemizing,” said Rick Cohen, a spokesperson for the National Council of Nonprofits in Washington, D.C. “That means that only 5 percent of taxpayers would have access to the charitable deduction, which is a vital incentive for people to give.”
Cohen says a drop-off like that means a lot of money would not be given to nonprofits.
“We’ve heard estimates saying that anywhere between $13 [billion] and $26 billion in giving to the work of nonprofits in communities across the country would be lost every year,” he said.
In Austin, there are more than 5,000 registered nonprofits, including KUT and KUTX. While philanthropy in Austin is growing, it lags other cities of equivalent size.
“We’re really good at volunteerism here in Austin, and we’re ahead of the national average, but we have some room to make up on the national average of giving in dollars,” said Celeste Flores, executive director of I Live Here I Give Here, a fundraising nonprofit that helps around 700 other nonprofits around town with its Amplify Austin Day.
Austin ranks 33rd in money donated among the top 50 U.S. metro areas, and Flores said, since the city’s younger population may not have as much to give, losing the charitable deduction may not make too much of a difference.
She said the key is to motivate donors on the strength or missions of the programs they’re giving to.
“It’s all about learning about our community of nonprofits and being inspired to give,” Flores said. “So, I think it’s on us, too, as an ecosystem of nonprofits to inspire and to share what the needs are of the community and how we’re solving those needs.”
Inspiration aside, there still is a big push of donations at year’s end, because of the itemized charity deduction.
I Live Here I Give Year receives about 5 percent of its annual gifts in the last week of the year. KUT receives hundreds of individual donations that same week, with more than a third of those last-second gifts posting on the last day, largely due to the tax incentive.
“Ten percent of giving occurs on the last three days of the year," Cohen said, "which really points to the fact that the tax incentive is an important motivator to give – and to give more.
The House and Senate still have to reconcile the differences in their respective tax plans. There will be changes – perhaps, scaling back the plan to double the standard deduction.
GOP leaders are hoping to pass an overhaul by the end of the year.