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How The Tax Rewrite Could Impact Charitable Giving

Source: NPR 

(Heard on All Things Considered)

December 3, 2017

United Way CEO Brian Gallagher tells NPR's Michel Martin how the current versions of the Senate and House tax bills would negatively affect charitable giving.

(Transcript below)

MICHEL MARTIN, HOST:

Another big tax policy change included in both the House and Senate bills could have an effect on charitable giving. Right now, Americans can get tax breaks for donating to charity if they itemize their deductions or spell out to the government all the different ways they qualify for tax breaks. Both the GOP tax bills would increase the standard deduction that taxpayers can get if they don't itemize. Charities around the U.S. are saying that doubling the standard deduction essentially takes away incentives for middle-class families to donate to charities, and that could hurt the work these charities do in communities.

Brian Gallagher is the president and CEO of the nonprofit United Way Worldwide. That's one of the nation's largest charities. He says United Way rarely takes positions on major bills but has come out strongly against the GOP tax plans, saying they will dramatically undermine the charity's work. He joins us now in our studios in Washington, D.C., to explain why he's so concerned about the tax bill. Thanks so much for joining us.

BRIAN GALLAGHER: Good to be here, Michel. Thanks.

MARTIN: So I understand that Congress is not doing away with tax deductions for charities, so can you tell us why you think this bill would cause fewer people to donate to your organization?

GALLAGHER: Yeah, so technically the charitable deduction remains in both the House and the Senate legislation. But as you said, the standard deduction will almost double. There will be 30 million people today who itemize their tax deductions who won't in the future. They'll take the standard deduction, and that means that they won't have the charitable deduction or if they give to charity, it'll be taxed.

MARTIN: So I don't know if you can quantify this, but how much charitable giving do you think that those potential taxpayers represent...

GALLAGHER: We can't...

MARTIN: ...Or those donors represent - do you know?

GALLAGHER: ...Yeah, we can't quantify it. We had the Indiana School of Philanthropy - the best in the country - model it for us. And 82 percent of all charitable giving comes from people who itemize their tax return. And the estimate is that charitable giving will go down $13 billion with the changes in both these pieces of legislation.

MARTIN: How do you think it would affect your organization in particular? I think if many people don't know any other charity, they probably know yours.

GALLAGHER: Well, think - don't think about it as donors. Think about it as the contributions that our donors make possible are services to 60 million people. These are daycare services, after school programs, mental health services. It's not just government who provide services to people and, in fact, nonprofits are much more efficient than government services. But if charitable giving goes down, you know, United Way is still going to be around. We're a multibillion-dollar organization. It's not about us. It's about the fewer people that will get served because of it. And some would say it was an unintended consequence of the legislation. That's fine. But we've made it clear that there's an easy fix. You know...

MARTIN: What is that?

GALLAGHER: It's a universal deduction for all taxpayers. Put it above the line. Whether you itemize or you don't itemize, get a deduction for giving. This has been part of the tax code for 100 years.

MARTIN: Setting all of that aside - because I'm sure this conversation is going to be had over the next couple of days - what would you say to those who would say that the motivation for giving shouldn't be the financial incentive, it should be the mission of the organization, and that if people are truly committed to these organizations, they'll continue to give regardless of the financial incentive?

GALLAGHER: There's no question that people will continue to give. They just won't give as much. The overriding motivation for people to give is to help other people. But it's clear, and the studies are clear that a financial incentive increases the amount of money that people give. And all the estimates start at a loss of 12 to 13 billion and go up to 20 billion. So people will continue to give. And they're motivated to help others, but they just won't give as much.

MARTIN: That's Brian Gallagher. He's the president and CEO of United Way Worldwide. He was kind enough to join us in our studios here in Washington, D.C. Mr. Gallagher, thank you so much for being with us.

GALLAGHER: Thanks, Michel.