Are Charitable Deductions on the Chopping Block?

I would have written this differently if I hadn't written it for the finance department intranet page, but the issue is important enough that I'm adding it to my personal blog post haste. The thing I didn't do in  my workplace post was issue a Call to Action. But on my own blog, I feel fine about advocating: Visit the Independent Sector's advocacy page and find out how you can protect the lifeblood of your favorite charity.

 Are Charitable Deductions on the Chopping Block?

Given that our personal livelihoods, our mission, and the viability of our sector all depend on charitable gifts, that is a question guaranteed to perk up our ears. It’s been on the table before and beaten back. But, with the heightened attention politicians are giving to national, state, and city deficits, the issue is in the spotlight once again. Some policy makers, including some in the Obama administration, are looking very hard at what the government would gain by phasing out or significantly limiting the tax deduction for charitable contributions.

Diane Aziz, president of the Independent Sector, wrote an opinion piece for the Chronicle of Philanthropy in July that compared this rising interest to a tsunami. In her commentary, she cites analysis predicting that if the deduction were wiped out entirely, charitable contributions would drop 25% to 36% annually.  A less drastic alternative, proposed by the White House, calls for capping the dollar value of contributions eligible for the deduction.  While that sounds like a moderate position, Ms. Aziz quickly points out that when someone gives $1,000 to a charity, the entire value of the donation–all $1,000–goes to work in the community. Meanwhile, the deduction only generates $350 in “lost” tax revenue.  As she says, “The federal government is unlikely to find another approach that can attract private spending for community services at a nearly 3 to 1 ratio.”

The fact that the benefits embedded in that math are lost on many was evident in a meeting  held with nonprofit organizations on September 9.  At that meeting, White House staff indicated that the Administration will make sure that nonprofits can take advantage of the hiring tax credits in the American Jobs Act, but also said that the President’s recommendations to pay for the jobs package will include a cap on tax deductions – including the charitable deduction – for high income taxpayers.

Ms. Aziz also connects the dots to actions being taken at the city and state level.  She points out that since 2000, 117 cities and 18 states have asked nonprofits to make voluntary payments to make up for exemptions from property and other taxes, according to the Lincoln Institute of Land Policy, and this trend will probably intensify as budget pressures mount in states and cities everywhere. If that weren’t chilling enough, Ms. Aziz reports that as she and her colleagues make the rounds of Capitol Hill, they find great support among our elected representatives for the work that non-profits do, but little understanding that non–profits are small (and not so small) businesses that collectively employ 10% of their constituents.

Lest I leave you dispirited and downcast, let me be quick to add that as part of their campaign to protect the charitable deduction, the Independent Sector has built a very nice toolkit of information  on why the charitable deduction is important to re-building our communities. If you like sound bite statistics that will amaze your listeners, the one pager on the charitable deduction is the thing to read, as is the FAQ. After reading both documents, I still can’t say that I can respond to the request for those interested to write an op-ed for their local paper, but at least I am  prepared to have a fact-based conversation with fiscally conservative friends.

Driving Traffic - The Office Intranet

Among the things I've taken on at my new job is driving traffic to our Finance and HR intranet pages. Neither is exactly a high spot for our employees and both should be. By way of showing you all what I've been doing with my "spare" work time, I thought I'd put two of my better posts here for your amusement. Not exactly the Great American Novel, but still a welcome creative interlude.

The Ghost of Christmas Past – Annual Performance Reviews

Posted by J.C. Braun on July 7th, 2011 at 8:44 am

     
The annual performance review cycle always feels a little like the visit of the Ghost of Christmas Past in Dickens’ great work, A Christmas Carol. The accomplishments question isn’t usually too bad, the strengths question is only mildly disconcerting. It’s the “areas to develop” question that causes everything from a mild case of butterflies to outright apoplexy.

    
From the Human Resource perspective, the issue is always, “How do we set up an honest dialogue that focuses on the individual’s development path?” From the employee’s perspective, the unspoken concern is, “What can I say that doesn’t reflect too badly on me?” From the supervisor’s perspective the question that haunts is, “How do I phrase this so that Jane or Mike hears me without getting defensive?”

     
What I think we all miss in this is the opportunity that is offered in this part of the review–I miss it as much as anybody. This is the chance to break out of the rut and reach for the sky. Need help with making presentations? Ask for it and work with your supervisor to develop a plan to build that skill. If you’re already a star at analysis, you’re not going to suddenly forget how to analyze simply because you focus on creating a compelling presentation and delivering it with aplomb. But one thing is sure…no amount of extra focus on analysis is going to build your presentation skills.

    
Steve Tobac is a BNET blogger whose work I sometimes like. His January post, What’s the One Thing Limiting Your Success? is a good refresher on why working on the less developed parts of your professional skill set has real benefit–sometimes well beyond the workplace. Not only is it helpful in dealing with the “areas for development” question on the annual review, it is also a great way to prep for building your goals for the new year.

    
What am I focusing on in my “areas for development” discussion? Fair question. Recently, an organizational consultant with whom we has been working asked a few of us to take a quick assessment test called The 5 Dynamics. Its goal is to analyze the ways people work so that teams can understand how their different members process and act. Of the 5 dynamics–Explore, Excite, Examine, Execute, Evaluate–my least strong area is Excite. In other words, I find it easy to develop ideas, easy to kick their tires, and easy to deliver results. But…getting other people excited about those things? Not as easy. I’ve been thinking about that since taking the assessment test and wondering about how to build that skill. Sounds like a growth point, doesn’t it?

Youth Before Age? Not Where Investing is Concerned.

Posted by J.C.Braun on June 27th, 2011 at 12:57 pm

    
One of the great challenges of my job is inventing ways to keep people from tuning out as soon as I mention certain words. Retirement is one of those words. Nevertheless, I beat the drum as loudly and creatively as I can, as often as I can.

    
It seems that younger workers in America, insofar as they are taking advantage of 401(k) plans at all, are skewing ultra-conservative in the choices they make about where to store their salary deferrals and their employer contributions. The fact is, they’re making more conservative investment choices than their grandparents! A full 59% of 18 – 34 year olds surveyed by Braun Research (no relation) favor low to moderate risk investments (cash, bonds, etc). Even survey participants who were 65 and older were more risk tolerant than these youngest investors.

     
What’s wrong with conservatism, you might ask. Nicholas LaVergetta, a certified financial planner, sees plenty wrong with it. He says, “It’s important…to consider the impact of inflation and taxes.” Meaning: If you park your money in the ultra-safe money market fund, you can feel good about your principal remaining intact, but you won’t see it grow. Meanwhile, everything else–from gas to the cost of a college education for the kids in 20 years–is going up. Result: You still have the dollar you put aside, but it buys a heck of a lot less than it did the day you stashed it in that money market fund.

     
Some skeptical conservatives forego using 401(k)s entirely because they have so little faith in the market. At first blush, that may not seem like such a bad idea, given the volatility of the last several years. But with a _% employer match in play, opting out really does amount to cutting off your nose to spite your face. What the match does is give you an immediate 100% return on every dollar you put into the 401(k), up to _% of your salary. Where else do you see returns like that? Prudence certainly suggests that the smart thing to do, even if you are totally down on the stock market, is defer _% of your pay into the 401(k) so as to reap the benefit of the employer match. The employer profit sharing contribution gives you a leg up whether or not you put your own money into the 401(k) plan, but that _% employer match is dependent on you putting at least _% into the plan.

    
Two short, very readable articles for those who wonder if maybe they should diversify their 401(k) holdings just a little:Come On Gen X, Take Some Chances and What’s Gen X So Scared Of? Stocks.

    
If you’re still with me, take a look at Jason Zweig’s helpful article on when it is and is not advisable to take a loan from your 401(k). The numbers of loans taken from 401(k)s are rising across the country–up 6% over 6-8 years. For some the loan made sense. For others, it was a big mistake. If you are even thinking about the possibility, take some time to read: Banking on Yourself: Is It Ever OK to Raid Your 401(k)?