So What Does all of This Mean for Philanthropy?
Early on Wednesday morning, President-elect Donald Trump was confirmed in winning the election to become the 45th President of the United States. But the Presidential race was not the only landmark in American politics this week. Also decided by this election were 435 seats in the House of Representatives and 34 seats in the Senate. Both chambers of Congress will remain under Republican control despite the current tally of a net loss of one seat in the Senate and a net loss of 7 seats in the House.
The question becomes: what does this mean for foundations and the philanthropic sector? Though this answer is multi-faceted with many implications that are still becoming clear, some of the key takeaways are this:
- The leadership of the Ways & Means and Senate Finance tax-writing committees in the House and Senate will, by-and-large, remain the same (with some exceptions for several subcommittees). With Republicans in control of both Congress and the White House, however, the likelihood that we will significant movement toward comprehensive tax reform in 2017 is high.
- Philanthropy Caucus Co-chairs in the House—Congressmen John Lewis (D-GA) and Pat Tiberi (R-OH)—and in the Senate—Senators Chuck Schumer (D-NY) and Richard Burr (R-NC)—all retained their seats and will continue to provide leadership for the Caucuses.
However, these observations only scratch the surface in terms of the many other implications this election will have on our sector and our work. Join us at 4:00pm ET on Tuesday, November 15th for a complete post-election analysis—including insights from nationally syndicated columnist and Pulitzer Prize winner, Connie Schultz, and Managing Director of the Federally Policy Group, Ken Kies.
Exclusive from our colleagues at the National Council of Nonprofits.
Voters Approve Ballot Measures on Minimum Wage, Campaign Finance
Voters across the country gave their support on Election Day to issues that have seen little action in the U.S. Congress. As a result of the voting, for instance, the minimum wage hourly rate is going up in four states: Arizona, Colorado, Maine, and Washington State, as well as in numerous communities. Arizona’s Proposition 206, which passed with nearly 60 percent of the vote, begins phasing in a higher rate on January 1, 2017, and also guarantees 40 hours of annual paid sick leave to employees of businesses with 15 or more employees.
Voters also expressed support for campaign finance reforms. Four separate ballot measures asked the electorate to set the rules on campaign contribution limits and address whether to restrict the U.S. Supreme Court’s Citizens United v. Federal Election Commission decision. In that case, the Court held that political contributions and spending must be treated as constitutionally protected free speech. California’s Proposition 59 and Washington State’s Initiative 735, both of which passed, urge their respective state’s congressional delegations or state’s elected officials to use their authority to overturn or repudiate Citizens United, potentially through an amendment to the U.S. Constitution. Missouri, the only state without any limits on campaign donations, voted to re-impose limits on campaign contributions that had been abolished in 2008. South Dakotans approved a ballot measure that extensively revised campaign finance laws by, among other things, lowering contribution amounts to political action committees, political parties, and candidates for statewide, legislative, or county office, and setting up a voluntary publicly financed campaign system.
Experience in the States on Caps to Charitable Giving Incentives
The Trump Tax Plan provision that calls for placing a cap on itemized deductions, including charitable donations, is raising concerns among foundations, donors, and charitable nonprofits that such a proposal would discourage contributions to the work of organizations in communities. Similar proposals a the federal level have never gained much traction in Congress, but the experience in the states over the past five years shows that caps are frequently proposed by politicians seeking to increase spending or reduce taxes.
In 2011, policymakers in Hawai`i sought to fill a budget hole by capping the state’s charitable giving incentive and all other itemized deductions to limit the benefit for upper-income taxpayers. In Michigan that year, the Governor successfully championed a bill to repeal the Michigan Credit for Charitable Gifts –tax credits that supported the work of homeless shelters, food banks, community foundations, and many other Michigan nonprofits – in order to fund business tax breaks. In both cases, nonprofits reported significant, well-documented reductions in charitable giving.
The adverse impact in Hawai`i was so distinct that the Governor joined with nonprofits in working to remove the cap on charitable giving in 2013. Also that year, legislative efforts to cap itemized and charitable deductions were proposed and defeated in Oregon and Vermont. In Kansas and North Carolina, legislators expressly carved out the giving incentive from a cap on other itemized deductions. Minnesota considered, but rejected the idea of switching from a charitable deduction to a tax credit. See this recap of the action in 2013.
The effort to cap itemized deductions returned in 2015 in numerous states, most notably in Vermont and North Carolina. In both states, nonprofits utilized data developed from the earlier challenges in Hawai`i and Michigan to persuade policymakers that placing a cap on charitable giving incentives creates significant negative consequences for communities and the people served by nonprofits.
Regardless of whether Congress takes action in the next two years on comprehensive tax reform, state legislators and governors have already expressed interest in renewing the debate at the state level. To date, nonprofit advocacy efforts have been unified and largely effective in demonstrating the value of current giving incentives.