Posted by Andrew Watt, FInstF
In the high-stakes game of sequestration being played out between the White House and Congress, Democrats and Republicans, one side seems certain to lose: America’s nonprofit sector.
If sequestration occurs and $85 billion in automatic cuts are enacted, funding for charities in the form of grants and government contracts will be dramatically curtailed. Even if a compromise is reached and sequestration is avoided, deep cuts in nonprofit funding—in addition to caps on itemized deductions, including the charitable deduction—could still be implemented.
Significant cuts that will hit charitable programs hard—and the people who depend on them—are now on the table. Caps and limits on the charitable deduction—which will decrease charitable giving—are also on the table. The Obama Administration is pushing a 28 percent cap on all itemized deductions. Congressional Republicans have contemplated a similar cap.
Yet, we are lost in the politics of the moment—without any regard to the facts. For nearly a century, the charitable deduction has proven to be hugely effective. For every dollar of revenue forgone by the deduction, it provides roughly a three dollar return in the form of philanthropic services. The deduction encourages more than $300 billion in charitable contributions every year.
But there is no discussion of what this effective incentive means to charities. There is no discussion of how we will fund programs in the future. There is no discussion about how we can tackle the long-term problems that will continue to plague our country long after the sequester.
I lead an organization representing nearly 25,000 fundraisers and charities across the U.S. My main interest isn’t the sequester itself, but the consequences of whatever “solutions” our government devises. And make no mistake, although the overall amount of money involved in the sequester may be small compared to our the nation’s total budget, these cuts—and potential limits to the charitable deduction—will have a huge impact on our ability to provide programs.
We MUST have a conversation about long-term philanthropy and charity in this country, and the time is now.
Philanthropy is an extraordinary American tradition that is the envy of countries around the world. The charitable deduction and government funding for charitable programs are symbols of our commitment to the impact and change that philanthropy creates—communities coming together to help solve problems. Altering that commitment is not something we should take lightly or do in the spur of the moment.
In the battle over the sequester, the current discussion leaves the nonprofit sector between a rock and a hard place. But the Administration and Congress must remember our country’s long-standing commitment to philanthropy. The sequester will come and go, but the need for charitable programs will remain. If we forget our commitments and don’t talk about the long-term outlook for philanthropy, then we will do irreparable damage to charities—and to Americans across the country who depend on their services.