Historically, not-for-profit institutions which have the designation of 501(c)(3) have been exempt from corporate taxes. Charities however, do pay withholding taxes and benefits to their employees and now are subject to the MTA tax.
For many charitable organizations, the introduction of the MTA tax will present a shift in resources, which could have been used for programs and services. In addition, charities bear the overwhelming responsibility of fundraising that is difficult in the best of times and a nightmare during the worst of times – now!
To make matters even more difficult for charities, there has been a great deal of discussion about changing the tax code for individuals who make direct donations to charitable organizations. Instead of receiving an absolute dollar for dollar deduction for a charitable donation, this new proposal would only allow for some percentage. How would this affect all of the charities providing services in local communities?
To answer this question, it is important to understand that charities provide a safety net for the poorest members of society who either cannot or do not access social service programs. This means that in most communities social services that are provided by governmental agencies cannot meet all of the needs of children, the poor, the disabled and/or the mentally ill.
Charities “go” where governmental agencies do not. From a fiscal perspective, charities are more cost effective because their goods and services are generally donated. Certainly, at a time of financial economic crisis charities cannot be replaced by governmental programs. Never! For every dollar that is donated to a charitable organization, taxpayers save a thousand dollars in governmental services, programs and bureaucracy. Remember, the volunteer in a charitable organization has a supervisor, salary and benefits when he/she works for a governmental agency.
Therefore, the discussion about changing the charitable deduction “formula” is not just foolhardy it is socially shortsighted. With the looming change in the tax code, the donations made to tax-exempt organizations will drop, and anyone who says that they will not is obviously clueless and/or disingenuous.
People make charitable donations for many different reasons. Sometimes people have family members with a disorder or disability serviced by the charity. Sometimes people themselves have recovered from a specific disorder or disability.
However, for the very few, there is the altruism of doing something selfless and generous but meaningful to someone less fortunate.
Whatever the motivational factor, the only important issue here is the maintenance and support of the social safety net, which creates a tapestry of programs and services that is fragile.
When charities are threatened in any society, people need to take stock in the reality of what is occurring. When charities close in communities, they cannot be quickly or easily restarted. People need to protect the charitable organizations within their communities. Without these programs and services, the most unfortunate individuals within our society will have absolutely nothing. Let us be clear about what this change will mean.
The change in the tax code will actually “tax” people for being generous. It will de-value the act of giving. If the decision-makers were smart, they would do just the opposite. Since governmental services are going to be cut by anywhere from 15-20 percent, every dollar donated to charities should be worth $1.20 as a tax deduction. I understand that we are faced with an economic crisis, but the fact that there is a proposal to change the tax status of charitable donations is a disgrace.
Ellenmorris Tiegerman, Ph.D. is the founder and executive director of the School for Language and Communication Development.
