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How Federal Budget Cuts Affect Non-Profits

The debates over the 2014 Federal Budget have been at the center of domestic politics lately, especially with the sequestration of last month. The biggest question, of course, is what are politicians willing to cut, and the itemized charitable giving deduction is on the table to be reduced. The non-profit sector has responded with a coalition of some of the most prominent charities in the U.S. to call for the current rate to be maintained, and argue that charitable giving should not be held in the company of mortgage deductions as a potential tax loophole. Some in the non-profit community, such as Rick Cohen of the NonProft Quarterly argue that other budget cuts – those that impact essential services that alleviate poverty should be more central than the charitable giving deduction.

Reducing the charitable giving deduction would largely effect those in the highest tax brackets, those who make over $200,000 a year, and itemize their deductions. Most donors, at least those that make smaller donations, are unlikely to be effected. This is good news for Jolkona and our donors, as our partners are mostly international, and rely on micro-donations. The non-profits that will be most effected are those that not only rely on large donations from wealthy donors, but also those that provide domestic services, especially the ones that focus on poverty.

Cohen argues that additional budget cuts from agencies that provide services for people in need are perhaps are more concerning than the charitable deduction issue, at least by themselves. The budget cuts would mean that non-profits that provide similar services as the reduced agencies would have to shoulder significantly more of the demand, which has increased significantly in the last decade. While he has a good point that the charitable deduction argument has pushed attention away from the issues surrounding budget cuts, the coalition of non-profits states that the problems are interconnected. If the itemized charitable giving deduction is reduced, then it could be less of an incentive for large donors to give. The non-profit sector could see the loss of $9 billion in donations, meaning that non-profits, which are already shouldering an increased burden from the budget cuts, would be additionally impacted.

If the reduction to the itemized charitable giving deduction passes with the 2014 budget, the non-profit sector may have to reconceive how they get their donations, and the kinds of donors they reach out to. There is some fear in the non-profit community that without the actions of major donors, fewer people at all income levels would give. With a giving culture that emphasizes the small contributions of many, as opposed to the large contributions of a few wealthy donors, the impacts of these budget cuts maybe wouldn’t sound so dire. Here at Jolkona, we have already made an international impact with that philosophy, believing that $15 can easily change someone’s life.

However, changing an entire culture of charitable giving takes time, and there are people in need much sooner. With the potential of budget cuts, some non-profits may need all the help they can get. You can make a difference today, and help an under-empowered person here in the US. With a donation of as little as $25 through the Jubilee Women’s center, you can support a homeless woman, and help her find employment and independence. Or, through the Technology Access Foundation of Seattle, you can donate as little as $30 to support the technology education of an underserved youth, preparing them for a career in science, math or engineering.

It is difficult to predict how extreme the effects will be if reductions on charitable giving deductions comes to pass. However, you don’t have to wait until a crisis to make a difference. Even those that aren’t wealthy, and can’t make massive donations can have a truly meaningful impact.

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  1. Pingback/Trackback
    April 17, 2013 at 9:20 am

    Effects of Government Budget Cuts on Nonprofits - Nonprofit Hub - Nonprofit Hub

  2. Pingback/Trackback
    May 15, 2013 at 4:58 pm

    The Listening Post Project: Why Non-profits Matter

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