Federal Legislation | State Legislation
Jul 16, 2010
A Canary in the Coal Mine – Capping the Charitable Deduction
Consider this…
Unlike the federal government, every state except Vermont has some form of balanced budget requirement. What does this mean in practical terms for the future of philanthropy?
We all know that the economy has not been kind to state and federal budgets. At the federal level, the government has responded by pumping money into the economy, in the hopes of jumpstarting economic growth and in the process running up enormous deficits. But balanced budget requirements at the state level won’t allow that and as a result, states are in the hunt for revenue with a vengeance.
We have already seen some serious activity in states to lessen incentives for charitable giving. As noted above, the Hawaii legislature passed legislation (H.B. 1907) to cap the itemized deduction for higher income individuals, but happily, Republican Governor Linda Lingle refused, saying that “Our community is still feeling the impacts of the recession and this is the time when we want to encourage donations to charitable organizations, not enact laws that hinder them.”
And in New York, the Assembly has approved cutting the charitable deduction in half for high income individuals as part of a revenue raising package. As of press time, the New York State Senate had not approved that package and indeed they appear headed toward a standstill on the revenue bill. Mayor Bloomberg, when asked about the proposal, said it was “as crazy as that hedge fund thing”, referring to the revenue proposal to tax people who work for hedge funds in the state but live elsewhere. We are working to defeat the charitable deduction measure in New York and will keep you posted on our efforts.
Like the canary in the coal mine, what we see at the state level are likely the early signs of what we ultimately see at the federal level as the caucus of “No New Debt Democrats” continues to grow.
Keep an eye on the states. We believe their increasingly far-flung efforts to raise money are the shape of things to come at the federal level.