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This is a space where Foundation staff share their thoughts and musings on giving and community:

A Note of Support for the Charitable Tax Deduction

Posted by: Stuart Comstock-Gay on 8/29/2013

My friend John Killacky recently wrote a great piece for the Burlington Free Press. He talks about the perils of capping the charitable tax deduction in Vermont, arguing for the value of nonprofits, and pointing to the experiences of other states. Here’s the kicker:

As our legislators debate implications of a tax overhaul, I hope they remember that nonprofits serve a triple bottom line, all subsidized by donations: they deliver programs in a fiscally balanced, cost-effective manner, their double bottom line makes programs accessible to serve those less fortunate, and their triple bottom line is achieved when those they reach contribute to society.

For starters, I say “amen.” Indeed, in an era where we’re seeing reduced federal and state support of nonprofit programs, a challenging economy leading to flat donation levels, and a constantly increasing demand for services—we need to be wary of anything that discourages giving. 

Just a couple of days ago I talked to the director of a human services organization who pointed out that the annual grant he gets from the state has remained flat or dropped, forcing him to raise ever more private dollars to cover the difference. Meanwhile, the demand for his organization’s services continues to grow. To be clear, he wasn’t complaining; he was expressing deep concerns about the state’s ability to provide core services through the social sector. 

The federal charitable tax deduction was added to the tax code in 1917, when income taxes were being dramatically increased to pay for World War I.  The deduction was a way to ensure that charitable organizations continued to get the money they needed to do their good work. We at the Vermont Community Foundation see this good work on a daily basis, and we believe the charitable tax deduction is still important—it’s not a perfect model, but it has encouraged millions of dollars in contributions over the years. We shouldn’t dismiss it lightly. 

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