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Many of us give all through the year, which is to say, we are conscious of giving periodically to specific organizations or through special events. Nevertheless, the last week or two of December sees a great spike in giving. The motivation being a heady mix of holiday good will and thankfulness, as well as a realization that a few more donations might register a useful deduction on the tax form come next April 15th. How should one plan for that end-of-year outpouring, and how might charities and nonprofits marshal that planning?
Melissa Berman, president and CEO of Rockefeller Philanthropy Advisors, was interviewed on American Public Radio‘s ‘Marketplace’ on some of the issues donors might consider as they write their end-of-year checks. Ms. Berman stressed the fact that nonprofits appreciate longer-term commitments, even if the amount of each installment is comparatively small. So, she said, we should consider what is most important to us and make a commitment to support that cause or community beyond a series of one-off holiday donations to various groups.
She also is well aware of the need to rebuild trust in organizations and institutions after the banking collapse of 2007, because charities are businesses too.
The trust deficit that this recession has created is a very significant issue. People give to nonprofits, often motivated by faith and belief and they hate to have those expectations dashed. I think that nonprofits probably have to be more thorough about documenting how they’re using funds, who they’re helping, and what a difference they’re making. And I think those of us who are making donations also have a responsibility to learn how to ask the right questions: Why does this problem exist? How can nonprofits make a difference? So that we can be making informed decisions and having a really informed discussion.
One piece of that ‘informed discussion’ concerns the whole concept of the end-of-year/beat-the-calendar tax writeoff, which Richard H. Thaler, professor of economics and behavioral science at the Booth School of Business at the University of Chicago, thinks should be ended. His argument concerns the general agreement for tax reform and national-debt reduction, with the former issue largely being framed around the issue of deductions. Professor Thaler argues that the deduction for mortgages actually feeds the deduction for charitable giving — both of which offer a de facto subsidy to the wealthy:
Having decided that charitable giving is a worthy cause, the government subsidizes charitable gifts from certain households, and for those chosen to be part of the plan, every dollar donated to a charity is increased by a specified percentage. To qualify, taxpayers must have a substantial home mortgage; the subsidy rate increases with taxable income. Low-income taxpayers receive no subsidy, but donations from qualified high-income taxpayers are subsidized by as much as 40 percent — or more.
One issue he does not discuss is the role of micro-donations. For most Americans – those who make micro-donations – these could not possibly add up to an amount worthy of reporting for taxes. Thus the thousands of small donors get no ‘break.’ The wealthy could write one or two checks on 30 December and get a significant kickback.
If Congress has the backbone to reconstitute the tax code in the next couple of years, we shall see if charities lobby to find ways to reward smaller-scale, online, micro-donors, or if big-house big donors can keep their multiplier tax break.
