Preserving the federal charitable tax deduction benefits us all
By Richard Ober
Every day, New Hampshire residents in need wake up knowing there will be food on their table, because of the New Hampshire Food Bank. From one cold and highly organized warehouse in Manchester, a dependable supply of nutritious food is distributed through more than 400 food pantries from Keene to Pittsburg to Portsmouth, totaling almost eight million pounds and feeding over 143,000 people in the course of a year.
The work the Food Bank accomplishes is top of mind right now because the recent holiday season underscores the reality of hunger in our communities. And because a national conversation about possible remedies to address the so-called fiscal cliff originally included capping or limiting the deduction provided for charitable giving in the nation’s tax code – or even eliminating the deduction altogether. Despite the short-term partial resolution passed by Congress on New Year’s Day, tax reform is still on the table.
This creates an opportunity to raise awareness of just how important this “tax break” is, because there is one other essential fact about the Food Bank that we should all be aware of: fully 98 percent of the revenue that supports its operation comes from charitable donations. Reducing the incentive to give is exactly the wrong strategy to pursue as a solution to national deficits. It weakens the network of organizations that hold our communities together. As national experts have pointed out, it doesn’t even make economic sense.
When a resident makes a charitable gift of $1,000, the government loses tax revenue of about $350, but the community receives the full benefit of that $1,000. Few other strategies can leverage private spending for public service to that extent.
Residents of New Hampshire are charitable: in 2010, the most recent year for which we have data, over half a billion dollars was donated by 180,000 households in the state. This provides a critical resource for a wide range of organizations. It contributes to higher education, arts and cultural institutions, and organizations that protect the environment and help preserve the farms and forests that define New Hampshire. It undergirds churches, mental health centers, pays for care for vets and the elderly, provides mental health services, and supports youth sports. While charitable giving will never replace public spending, it helps to close the gap in the towns and cities, and it plays a disproportionate role in the innovative thinking that conceives and makes possible new solutions to common challenges.
The immediate consequence of reducing or eliminating the charitable tax deduction would have a negative impact here. Think about how it would lower the ability of the New Hampshire Food Bank to feed those in need. And that is just the beginning. Here are several relevant statistics:
- The nonprofit sector in New Hampshire employs over 85,000 people, 14.3 percent of the state’s workforce, and it generates more than $9 billion in annual revenues.
- Fully 30 percent of Americans queried said they would reduce their giving if tax incentives were removed, and 62 percent of those said they would reduce giving by “a significant amount.”
- Charitable giving has already been reduced by the on-going effects of the economic crisis that began in 2008. Giving declined nationally by 14 percent in 2008, and by another 8 percent in 2009.
As resources have shrunk, the organizations we all depend on have typically worked hard to cut costs and increase efficiency. That has enabled them to continue to address needs—which in turn have increased because of weakness in the economy and cuts in government spending.
The New Hampshire Charitable Foundation, the state’s largest nongovernmental grant maker, has connected charitable residents with organizations that serve the community for over 50 years. Every day, we see how important it is that we all come together to support the work of the nonprofit sector. We have reached out to the members of the New Hampshire congressional delegation to urge them to reject proposals that would limit or end deductions for charitable donations, and invite others to speak up about this important issue. Charitable giving is a deeply rooted New Hampshire tradition, and we need to continue to honor and support it.
Richard Ober is President and CEO of the New Hampshire Charitable Foundation