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#296 After the Tax Overhaul: Grading our Sector

December 21st, 2017

Richard Marker

Most Americans know in their hearts that Congress passed a scam under the guise of tax overhaul. Since the bill was written behind closed doors up until the moment it was passed, with no hearings or public review, all any of us could do was express our concern about what should or shouldn’t be in it. I suspect that very few of us will be thrilled when the details come out. But what we know so far is that very few of us should take much pleasure even if taxes for some go down for a bit.

Why do I say that?

The entire assumption that tax reduction is a cherished goal in any society is bizarre. Taxes are what pay for public services that we want or need, and in almost every case are better provided by a responsible government. Most of us who are not science deniers want to breathe clean air, drink healthy water, eat food that we can trust. Most of us want to travel in safe cars, buses, planes, and trains. Most of us want Congress to respect our decades long contract to respect our defined benefit plan called social security, and would like to be assured that dealing with health needs won’t bankrupt us even in our old age. Most of us want an education system that educates us effectively and fairly regardless of our zip code and ethnic or racial background. Most of us want to know that we have a just judiciary, a trained foreign service, treaties that others can trust, and a military that can protect us with a clear moral standard.

Most of us, I suspect, even want a Legislative Branch and an Executive Branch that understands and endorses all of these things, although I guess I should not expect miracles on that one.

The tax overhaul does none of these things. In fact, it is predicated on two things: that cutting taxes as a goal supersedes all other goals [especially of course for the very wealthy who shouldn’t have to shoulder a tax burden they can easily afford]. And that in order to do so, we can reduce or eliminate public commitment to achieve any of the above goals that define every other modern nation.

Most of the analyses of the sham vision for America only look at the tax burden. And most independent analyses reveal that even the taxes for most people, even if they drop modestly for now, will rise no later than 8 years from now – sooner for others and immediately for some. But that is only part of the story. If health insurance costs rise, it effects our personal bottom line even if it is not through a tax. If people die or get ill because of removal of government guaranteed protections, who will pay for the additional burdens on families? If there are no assurances of fairness in the workplace or schools or on our streets, what resources will remain to correct inequity and those lost communal resources? And much, much more.

Our taxes may go down a little; our net standard of living will deteriorate a lot.

Now – none of this rant is new info, but it needed to be said to get to the next part of this post. Whom do they think will pick up the slack? Economists have almost unanimously said that the trickle-down theory is bogus. And besides, there is no incentive for the private sector to be better employers or even feel the need to hire more people at a time of increased automation and on-line commerce.

That leaves the voluntary sector, otherwise known as the non-profit or non-government or public interest sector. And voluntary is the key word. Americans have a history of generosity, and our tax system has historically rewarded that generosity. History has also shown that tax changes have only a short-term impact on that generosity – short term up or short term down, but over the long haul, giving reverts to a mean.

If that history proves correct, we are in even bigger trouble. Because the burden of a large complex society will fall to those voluntarily funded [professionally directed] organizations. Who will compensate for a reduction in educational funding? Who will provide sustenance to the newly homeless and unemployed and uninsured?

Does anyone really believe that, as good and broad as that sector is, it can pick up the massive slack of government reduction? Does anyone really believe that voluntary giving will increase 3 or 4-fold to even begin to make a dent in that new donut hole of financial vulnerability created by the tax cut scam? The demands on this sector will make those of recent recessions pale.

And this, finally, is where I grade our sector in the run-up to the vote.

I don’t think we did so well. [I am in this sector – mostly on the funding side – so I have to include myself in this accountability.

There were some on the funder side [e.g., NCRP and the Forum to mention only a couple of which I am aware] who spoke eloquently about the impact on people and not the impact on taxation of potential changes in the law. In my mind, they got it – and spoke to the underlying issues. To be fair, I am sure that many other groups also did but I simply didn’t see their public advocacy statements.

However, the overriding attention of the philanthropy support world focused on two things: keeping the Johnson Amendment [a topic for another time] and holding on to tax deductibility for charitable donations. Both of these are worthy goals that I support, but they missed an essential point.]

When the foundation world takes a lead role in advocating for tax deductibility – without a clear articulated vision of other societal needs, it sounds like any other industry group’s self-promotion. We, I hope, are different from the NRA and the Fossil Fuel lobbyists whose lobbying effort are not related to a larger vision for society but for their own self-serving agenda regardless of the negative consequences on society as a whole. I would hope that those of us in the philanthropy world are better than that. We don’t do philanthropy and support wonderful and striving nonprofits just because it is in our interest, we do it because what we support can make a difference to millions of people. At the end of the day, our sector should care about our impact more than our institutions.

But most of the statements that I saw, and received in my in-box, were for advocacy efforts for continuing tax deductibility, with little about the totality of the impact on society as a whole. The sound-bites sounded like another bennie for rich people who wanted to make sure they kept another one of their deductions. Not the best optics for a sector that really does care.

Now, I know that many will take umbrage at this characterization, that the organizations did provide research that shows the financial impact on fundraising. But I have been concerned about these optics for a long time because our sector is not an independent one. We are constantly in a dynamic, if virtual, dialogue with public policy, not independent of it.

Advocacy for charitable deductibility should be tied in with a larger vision of why this sector exists at all, of the pervasive inequity in the social weal and our national policies that reinforce that inequity, of what taxes should in fact support, and how, bottom line, to assure that all citizens are treated fairly and have the necessary means to live respectively and with dignity.

I have devoted most of my professional life to this sector. I believe that it is necessary and reflects something good about every society that supports a thriving voluntary sector. But I don’t believe that our sector should replace public support for basic human needs, and that is what this tax bill implies. I know that most in the philanthropy world agree – I only wish we had said that as loudly as we advocated for deductibility of our contributions.

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