The New Mexico Association of Grantmakers has serious concerns about House and Senate tax proposals because they would cause significant harm to charitable giving in New Mexico and to those that philanthropy serves – low- and middle-income workers and families.
As we are reminded at this time of year, Americans are generous people. Every year Americans donate billions to charities including hospitals, schools, feeding programs, veteran’s organizations, museums, community projects and civic institutions. No other country in the world is so generous.
But current tax reform proposals in Congress threaten this American tradition of giving.
That’s because the tax bill that just passed in the House and is currently being considered in the Senate fails to preserve the charitable deduction – which has existed for 100 years to incentivize giving in America. Both bills would result in the charitable deduction no longer being available to 95 percent of all taxpayers, because of the proposed expansion of the standard deduction.
A new study by the Tax Policy Center estimated that charities would lose between $12 billion and $18 billion next year because of the tax bill’s effective elimination of the charitable incentive for donating to nonprofits. A study by the Indiana University Lilly Family School of Philanthropy found similar drops in giving.
How will this bill hurt New Mexico charities?
In 2015 in New Mexico, the IRS indicates that 159,270 returns reported charitable contributions. The total value of these reported contributions was $791,263,000. A 5 percent loss resulting from tax reform would mean $39,563,150 less to fund private food banks, homeless or domestic violence shelters, day care or job training. Nonprofits’ tight budgets mean lost dollars translate directly to reduced services for our communities.
This significant loss of charitable contributions would also lead to the loss of thousands of nonprofit jobs. The nonprofit sector is our country’s third-largest workforce, employing 10 percent of all workers. In New Mexico, the nonprofit sector employs 48,000 people.
We ask our senators, Martin Heinrich and Tom Udall, to support a universal charitable deduction in the current Senate tax-reform bill, which would allow taxpayers at all income levels to take advantage of this 100-year-old charitable giving incentive. Without such a tax incentive, charitable giving could decrease dramatically, with devastating impact on the many Americans helped by charities every single day in every corner of New Mexico.
We need to be encouraging more giving, not less.