COLUMBIA — Representatives of local nonprofits are worried that proposals in Washington, D.C., to reduce or eliminate charitable tax deductions could harm their financial health.
As part of negotiations aimed at preventing the nation from going over the "fiscal cliff," some Democrats and Republicans have proposed raising tax revenue from the wealthy by capping some tax deductions, including those for charitable giving.
A worse scenario for nonprofits might unfold if lawmakers and President Barack Obama fail to reach agreement by the end of the year on proposals to raise revenue and cut spending. That would trigger across-the-board cuts — known as sequestration — and cause tax rates to increase by an average of almost $3,500 per household next year, according to the Tax Policy Center. If that comes to pass, individual giving could suffer, charities say.
The budget for the Heart of Missouri Chapter of the American Red Cross already has taken a hit with the loss of United Way funding. David Griffith, executive director for the chapter, said the Red Cross is trying to make up for that loss.
"We are concerned about it," Peggy Barnhart, spokeswoman for the chapter, said about the potential for trouble at the federal level. "We certainly appreciate that we have to do something about our deficit, but we question if charitable giving is the way to go about it when charities are addressing so many problems that government fails to address."
Barnhart said that about 60 percent of donations the Red Cross receives come from individual giving. She also said that nearly 40 percent of its donations come at the end of December, when people are trying to beat the deadline for tax-deductible charitable giving.
"That gives you an idea of what motivates people to give," Barnhart said.
Barnhart said that if a dropoff in charitable giving happens, the Red Cross would have to cut back on some things. They are working "bare bone" as it is.
"I really think the Red Cross provides services that people value and need," Barnhart said. "I don’t think we can walk away and say 'Oh, that doesn’t matter.'”
JoNetta Weaver, director of Meals on Wheels, said 70 percent of its budget comes from charitable donations, including those that come from fundraising. She said any federal budget solution that cuts deductions for charitable contributions or that dramatically increases taxes "would be a big impact on us.”
Representatives of the National MS Society Gateway Chapter also are worried. Sarah Gentry, public policy manager for the chapter, said a reduction in donations would especially hurt the research sector of the organization but also the education and emergency financial assistance sectors.
"We do definitely come down on the side that we want to keep the charitable tax deduction because any less would affect people’s incentives to give," Gentry said.
Tim Rich, executive director of the Heart of Missouri United Way, wrote in an email that the national United Way is "deeply concerned" about the potential impact to charitable giving. Those at the Heart of Missouri Chapter, however, hope political and economic challenges in the end will not influence charitable giving.
"It is my experience here in Mid-Missouri that when people see the face of need in our community, they always respond positively and generously," Rich wrote.
Bobbie Kincade, director of the Food Bank for Central and Northeast Missouri, said it’s important that it receive private donations. No one at the food bank is worried yet, though.
“We know that people who donate to the food bank understand food is a necessity,” she said, calling the people of Columbia “really generous.”
The food bank gets about 59 percent of donations from private individuals.
Colin LaVaute, shelter relations coordinator for the Central Missouri Humane Society, said individual donations make up 40 percent of the society's budget.
LaVaute said that while he likes to believe that the main reason people donate is from the "kindness of their heart," he also recognizes that some people donate because they get tax deductions.
"It's a big incentive," he said.
Even if they are hurt by a drop-off in tax deduction, LaVaute said they will keep on doing what they have been doing in helping animals.
The University of Missouri System is also bracing for possible cuts if sequestration. A report shows the system stands to lose $23 million.
Missourian reporters Caroline Michler and Justice Gilpin-Green contributed to this report.
Supervising editor is Scott Swafford.