Connecticut charities fret over danger posed by fiscal cliff
Washington – It’s the season for giving, but Connecticut’s charities are concerned Congress will act to dry up donations as lawmakers look to avoid the so-called fiscal cliff.
To avoid raising taxes on the wealthiest Americans, congressional Republicans are pressing to close tax loopholes instead — an idea some Democrats are embracing — and the charitable donation deduction is an attractive target.
Today, Americans taxpayer take a tax deduction for all the money they donate to a non-profit, organization — from their local church to the Sierra Club — as long as the donation doesn’t exceed 50 percent of their income.
But there’s talk on Capitol Hill about ending this deduction, or at the very least placing new limits on the amount of money that can be deducted — especially by the wealthy, who are top donors to charity.
“That would really strain if not snap the books for a lot organizations,” said Jeffrey Shaw, director of public policy at the Connecticut Association of Nonprofits.
The association represents 525 Connecticut nonprofits, from the AARP to the YMCA. The parent organization of the CT Mirror, the Connecticut News Project, is also a member of the association.
Shaw said nonprofits receive most of their funding from individuals, although many raise money from foundations, government grants and other sources, too. The charitable deduction is an incentive for individuals to give, Shaw said.
But, to avoid a phenomena called the fiscal cliff, an end to Bush-era tax breaks just as deep federal spending cuts take effect — lawmakers have put the charitable donation deduction on the negotiating table as a way to raise federal revenue.
That’s bad news, said Shaw.
He said demand for the services Connecticut’s nonprofits provide skyrocketed during the recession, just as people had less money to donate to charities.
“Right now our numbers are rebounding and we don’t want to do anything that would inhibit that,” Shaw said.
The Connecticut Association of Nonprofits sent a letter to all members of the state’s congressional delegation last week, urging them to defend the charitable deduction.
Christopher Licata, press secretary for Rep. John Larson, D-1st District, a member of the House Ways and Means Committee with jurisdiction over tax issues, said the lawmaker wanted a comprehensive review of the tax code but “remains a strong supporter of the the charitable deduction and would like to see it continued.”
But Sen. Richard Blumenthal, D-Conn., said a proposal to cap all deductions, including the amount given to charity at $25,000 or $30,000 or some other dollar amount, has merit.
“It’s the most likely way to attract bipartisan support,” he said.
Blumenthal also said he also supported President Obama’s plan to limit deductions to no more than 28 percent of a taxpayer’s income.
“Both ideas are worthy of consideration,” Blumenthal said.
Steve Taylor, senior vice president of public policy for United Way Worldwide, said placing a dollar cap on deductions would be devastating.
“The impact won’t be on the wealthy, but on the people we help,” he said.
Taylor said the poor will face a “double whammy” as government programs are cut back and charities are limited in what they can do.
On December 4 and 5, Charitable Giving Coalition, a group that represents hundreds of national nonprofits, will gather on Capitol Hill for “Protect Giving- D.C. Days” to try to persuade Congress to leave the charitable donation deduction alone.
Shaw of the Connecticut Association of Nonprofits said he’s not certain lobbying to defend the deduction will succeed.
“This is kind of a moving target right now,” Shaw said. “We’re hoping we’re not in the bulls-eye.”
Lawmakers eager to find revenues by closing loopholes hailed a survey released Monday by the Winston Group that said 65 percent of Americans agreed that the best way to avoid the fiscal cliff is to eliminate “special interest tax loopholes and deductions commonly used by the wealthy and cut government spending by a similar amount.”
Only 25 percent of the respondents supported raising taxes on the wealthy and cutting government spending by a similar amount, the poll said.
Sign up for CT Mirror's free daily news summary.
Free to Read. Not Free to Produce.
The Connecticut Mirror is a nonprofit newsroom. 90% of our revenue comes from people like you. If you value our reporting please consider making a donation. You'll enjoy reading CT Mirror even more knowing you helped make it happen.YES, I'LL DONATE TODAY