Supercharging our generosity through the tax code
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After getting back from Eau Claire, I spent the rest of last week getting our food banks prepared for the possible changes to the charitable tax deduction through tax reform.
Taxes, I know, real scintillating stuff.
But it’s really important, because the tax code is an important policy instrument. For example, the Earned Income Tax Credit, which is an important income support for millions of working families, is delivered through the tax code.
The tax deduction for charitable giving is the lifeblood of hundreds of thousands of important charitable organizations throughout the nation and in Wisconsin. It helps to magnify the generosity of our citizens and encourages them to get involved in and become stakeholders in important local issues, like hunger and food insecurity.
The deduction works like this: if you itemize their deductions, for every dollar that you donate to qualified 501(c)3 organizations like ours and our member food banks, you lower your taxable income equal to your marginal tax bracket.
So, in English: if you’re in the 25% tax bracket, for every $100 you donate, you can lower your taxable income by $25. If you’re in the highest tax bracket (39%), for every $10,000 you donate, you can lower your taxes by $3,960.
Recent tax reform proposals would change the century-old charitable tax deduction and reduce the incentive for giving by raising the standard deduction and cap the deduction for a single person at $100,000 and $200,000 for a married couple.
By raising the standard deduction, fewer people will itemize their deductions, which would reduce the amount of people making donations.
The proposed cap on deductions will affect major donors, as a married couple donating $1 million dollars will only be able to realize one-fifth of the benefit.
Our participating food banks and the over 1,000 affiliated food pantries and meal programs located in and serving our friends and neighbors in all 72 counties of our state depend on the generosity of local communities to invest their time, treasure and talent to fighting hunger.
We know the inspiring generosity of Wisconsinites throughout our state. We are beneficiaries of it every day. At the same time, the data show that the incentive for charitable giving matters.
December is the busiest month to receive donations. Our food banks raise nearly a quarter of their annual revenue in December, with a majority of it coming in within the last week of the month as our friends and neighbors are feeling both more generous and thinking about their taxes.
With the continued pressure for non-profits to deliver essential services, the charitable tax deduction must be strengthened and expanded, not narrowed.
With marginal tax rates, deductions, and the like on my mind at the end of last week, I finally sat down to do our taxes over the weekend. And while we had a tax bill (our online tax software tells me that doggie treats are not deductible for us), we still turned tax time into dinner time for many of our friends and neighbors living in our state by making a donation to our food banks through the Wisconsin tax check off. If you haven't filed yet, it’s so easy to do - learn more here.