While America’s and metro Atlanta’s nonprofits are not facing the dire circumstances staring many of our country’s large manufacturers and major financial institutions in the face — scenarios that include bankruptcy and nationalization — neither do these vital community resources benefit from the “too-big-to-fail” mentality that has prompted the federal government to commit billions of taxpayer dollars to shore up failing institutions such as Citigroup and AIG.
In fact, America’s nonprofits are facing lean times that are likely to be made worse, not better, as a result of policies being championed by the Obama administration.
Those in the nonprofit arena expecting a sympathetic ear in the new administration — after all, these are agencies helping precisely those seemingly in synch with the new president — were sadly disappointed when his spending plan was revealed to Congress. Arguing that tax laws allowing for charitable deductions “unfairly” benefited the wealthy, the president has proposed cutting the percentage of income that can be deducted, and capping the overall size of itemized deductions.
While the administration argues that the full impact of these (and other) tax changes would be softened because they are phased in and would not be felt until 2011, the fact that those in higher income brackets make their tax plans years in advance — including the amount and type of charitable donations — presents real concerns for nonprofits.
Most charitable gifts come from individuals, not corporations. In fact, about 75 percent of the $306 billion donated to charities in 2007 came from individuals. However, the 5 percent of corporate donations impacts nonprofits significantly, largely because they are planned; and corporations already are planning cuts to their 2009 charitable giving.
According to a recent report on corporate philanthropy by The Conference Board, more than 60 percent of corporations surveyed had either already cut their planned donations for 2009 (45 percent) or were now considering doing so (16 percent).
Not only are corporations planning cuts in charitable giving this year, but the administration’s new emphasis on the environment, including “global warming,” apparently is causing at least some corporations to redirect their donations from local focus areas, to nonprofits emphasizing environmental activities rather than social services.
United Way of Metropolitan Atlanta, the most visible player in the region’s corporate giving sector, will announce this month if it reached its ambitious, $82-million goal set last fall. If it does, it will be a tribute to the hard work of the United Way staff and its member agencies, as well as those heading its campaign, led by Deloitte executive Ed Heys.
However, the continuing economic weakness locally and nationally means that corporations, as well as nonprofits that rely for funds on corporate generosity, will face very real, if not debilitating challenges this year. Already, for example, Atlanta’s United Way has cut a dozen staff positions and is leaving other vacancies unfilled.
However, it is perhaps the environment facing the country’s wealthier taxpayers that poses the most serious challenges for nonprofits; and why Obama’s move to reduce incentives for donations by higher-bracket taxpayers is especially troubling.
The danger signs have been there since at least the second half of 2008 when, according to a study by Indiana University, large gifts to nonprofits — that is, $1 million or more — dropped 33 percent. While many taxpayers do not make charitable decisions based solely on tax consequences, they will undoubtedly give less if they face lower tax incentives on top of sharp declines in personal wealth.
In this environment, the Obama administration’s tax increases aimed at higher-income individuals will prove most harmful to those least likely to be able to withstand the brunt of those policies — our nonprofits.