By Michael Weiner
While we here at the United Way of Buffalo and Erie County are excitedly celebrating our 100th anniversary, 2017 also marks a centennial year for the federal tax deduction for charitable giving.
As this deduction offers individuals and households a tax incentive around charitable giving, it has helped many Erie County residents to generously offer financial support in service of our mission.
The Tax Cuts and Job Act legislation introduced by Congress last week includes many changes to the current tax structure. One change, an increase to the standard deduction, may have far-reaching effects on both non-profits and religious organizations in Erie County. A higher standard deduction means fewer people will itemize their tax returns.
However, taxpayers who have donated to charities can only receive the charitable deduction if they itemize their taxes. If fewer people itemize their taxes, the pool of people who have an incentive to donate to charity will shrink.
The Lilly Family School of Philanthropy at Indiana University estimates that this change to the standard deduction could lead to a reduction in charitable giving of more than $13 billion annually across the United States.
While it may feel early to know if these proposed tax changes will have an effect on the amount of charitable giving, recent history has shown us that donation levels do react to changes in policy.
In 2011, Hawaii placed a cap on itemized deductions, which included charitable donations, and the amount of charitable giving fell by an estimated $60 million a year until the cap was removed two years later. In that same year, Michigan repealed its Community Foundation Tax Credit. Experts now estimate that repeal to be associated with a significant decrease in charitable giving in the state.
Charitable giving is critically important in enabling local communities to meet local needs. The charitable deduction is a reflection of American values and our commitment to helping our neighbors. It is a unique incentive that encourages a selfless act. A reduction in the amount of charitable giving would be felt most strongly by the members of our community who are already the most vulnerable.
Our work at the United Way of Buffalo and Erie County would not be possible without the generosity of our donors. This change to the standard deduction, and its effect on the number of people who can claim the charitable deduction, would ultimately harm the charitable spirit of our community and run counter to who we are as the City of Good Neighbors.
We are calling on Congress to make the charitable deduction available to all taxpayers, therefore making it easier for everyone to have an incentive toward charitable giving.
Michael Weiner is president and CEO of the United Way of Buffalo and Erie County.