Exempt Donated Labor on Taxes the Same as Cash Contributions

New Orleans   Following all of the discussions on reforming the income tax system isn’t easy, especially since much of the time the people saying they are for reform and closing the loopholes really aren’t and sometimes the people saying they aren’t for reform, really should be.  Confused?  Yes, me too!

I stirred the pot a couple of months ago by saying that, hell yes, the exemption for donations to nonprofits for the rich should be capped out, just as the Obama Administration had argued, and that some of the so-called leaders of the fight to prevent changing the exemptions, especially the Independent Sector’s Diane Aviv, did not represent anyone but the mega-nonprofits and the rich, certainly not the rest of us.

I want to go one step farther.  I want regular people who are not rich as Croesus to be able to deduct their contributions of labor, given freely, to qualified nonprofits on their federal income taxes, the same way the bottom sitters and their accountants do with the flick of a wrist on their checkbooks.  Fair ought to be fair, and the fact that working people and many others give “sweat equity” should, if anything, mean more than the big ticket, name-on-the-buildings checkbook crowd.

I’m sensitive to this especially now that I have what I call my “volunteer and intern army” that powers so much of the research and communications work of ACORN International.  Sometimes when they are students, they get some course credit for community service, but often they do not.  Most times they want to help out, and often the help is huge.

Mardi Gras day a fellow named Vince Sellen and his wife, Gretchen, knocked on the door of our house and came in for a bowl of jambalaya and a sip of Texas spirits.  They are from near Seattle.  He’s a retired teacher.  Starting in 2006, one year after Katrina hit and straight through 2010, Vince would come down and volunteer for a couple of months every year, usually in the winter and into the spring, to help ACORN and then A Community Voice on hurricane recovery efforts doing a little bit of everything.  His help was invaluable!  He told a story this year that I loved about wearing his ACORN hurricane recovery t-shirt to the Zulu parade and being showered by coconuts, which is the only reward he ever received.  For all of the thousands of dollars worth of labor he donated, even if calculated at minimum wage, could he claim a deduction for that gift on his taxes? No!  That’s not right.

Garrett Reynolds was a union tradesman for the City of Santa Barbara.  He and a buddy who ran a bar in town spent three years building a mobile biodiesel rig that could produce up to 20,000 gallons of diesel fuel from grease, coffee grounds, and all manner of mischief.  They spent more than $20,000 out of their own pocket on the trailer and the pieces and parts required to build the rig.  I got a call from them several years ago.  They had decided Santa Barbara was not the right place for their fabrication, but New Orleans was.  My nephew, C J Butler, drove to Santa Barbara and my son, Chaco, flew out to meet him, and they hauled the rig back down to New Orleans more than a year ago.  For all of the hundreds of hours Garrett and his buddy spent building this beautiful machine and the hours spent driving it back that CJ and Chaco spent, the only thing that any of them could claim for their huge gifts were the out-of-pocket costs for the materials.

I could go on and on with stories like this all day and all night long.  Studies show over and over that low-and-moderate income people give are more charitable donations as a percentage of their income than any others, but their benefits are all from “the good of their hearts.”  Regular people, working people give invaluable labor to nonprofits.  Is it right or fair for them to not be able to claim any part of these gifts, while the rich claim and get credit for every penny?  I think not.

Once we start talking about reform, let’s cap the value of donations for the rich, but let’s also give some credit for the gifts of labor from the rest of us, which are part of what really make nonprofits grow and succeed.

The Company They Keep: Tax Tit Deductions, the Right, & Big Whine Charities

New Orleans    So you might ask in all of the hoopla as the USA went over the fiscal cliff, what happened to the charitable deductions that I have written about several times?

Well, there were some modest changes because some ceilings were place on the value of personal exemptions and itemized deductions for high-income tax filers making over $250,000 for individuals and $300,000 for couples.  This in fact was one of the so-called “wins” for the President since he did get some more tax justice by recovering some tax from such families even as many of the Bush-era tax breaks with some tweaks have now become permanent.  According to a chart in the Wall Street Journal the other day, this was extremely important and will yield $150 billion in new revenue to the government over the next 10 years.   These changes for those higher income families affect things like mortgage interest deductions, state tax offsets, and for those who bother to make any, their charitable deductions.

Predictably some of the old Bushies are yelping.  Ari Fleischer, George W’s old press secretary, wrote a crazy convoluted op-ed in the Journal slapping at tax justice and equity in a predictable response.  The embarrassing part of all of this is to read his argument as he peers around the smokescreen is what the right is building out of these minor changes in the charitable deduction allowances.  Fleischer argues that it’s true that people should give to charities out of the “goodness of their heart,” but then also whimpers that now he has less to give and defends his position with quotes from the Chronicle of Philanthropy and the anti-tax justice Charitable Giving Coalition of big time, big whine charities.

The Journal the day before had a similarly confusing statement from Diana Aviv, head of the Independent Sector, which claims to represent foundations (which are really tax shelters for the rich, let’s remember!), nonprofits (the mega-sized ones at least), and other charitable groups (huh?).  She wondered out loud what would happen now to her sugar daddies.  Leading with her mouth rather than her other parts of her noggin, she commented that in light of the increased tax rates on the rich and the caps on deductions for those with high incomes, “The big question for us now is, if we are increasing rates on folks…does the combination create a greater disincentive for people to give?”   A more sober and less self-interested observer, a J.P. Morgan analyst, Michael Feroli, was then quoted by the Journal with a prediction that “the new tax-break limits ‘should not directly affect…giving to charities or taking on more mortgage debt.”


What kind of world are we now working in where Diane Aviv and Ari Fleischer are doing the group hug with big-time, big-whine charities who are – and make no mistake about this – opposing a more equitable tax system?  This is all about their narrow, self-interest and not about the public interest whatsoever!  And, when we have to find comfort and calm from J.P. Morgan while the Cassandras are screaming, we are really going over a cliff.

What are they thinking?  When we have to have more revenue in order to protect the very real survival of critical welfare, health, education, and support systems and entitlements in this country for all our citizens, how can any nonprofit argue that their own programs or mission is more important than the common good?!?  When achieving this also brings more justice and fairer distribution to the United States, which has been moving rapidly towards becoming one of the most economically unequal societies in the world, this is a big win.   The Chronicle of Philanthropy should start writing a cover piece on this failure of nonprofit leadership in these times.

Here is the most bitter irony that we will have to hear and swallow soon.  These same nonprofits and their lobbyists, like Aviv, will soon be whining that they need more money, because government is curtialing services and support for the poor and other impacted groups the charities were claiming to help.  I wonder if any of them will ever realize then that they should have been lobbying for more tax justice in order to protect and expand all of these programs, not just trying to cover their own fat asses and paychecks.            

Aaron is Right, Aviv is Wrong: The Wealthy Cannot Keep Escaping Taxes

Aaron Dorfman

Quito   A number of the big dog, nonprofit charities trooped over to visit with Congress to try to protect every dime of their tax breaks, especially the blanket deductions that favor the rich and superrich.   They were led by Diane Aviv, the longtime head of Independent Sector, the big nonprofits trade group that has recently been squealing like a stuck pig about any change in their favored loophole status.   Having run nonprofits for decades, I have to say it’s an embarrassing spectacle.  There is no way that Aviv and the mega-charities speak for progressive nonprofits.

Luckily, Aaron Dorfman, head of the National Center for Responsive Philanthropy, does, or at least tries to, according to the statement his organization released that was quoted in the New York Times:

 “If nonprofit leaders don’t want changes to the charitable deduction, it is imperative that we get behind the president’s call for higher tax rates on the wealthy,” said Aaron Dorfman of the National Committee for Responsive Philanthropy in a statement. “The majority of nonprofits know this is true,” Mr. Dorfman said, “and I urge the hundreds of nonprofit leaders who have traveled to our nation’s capital for visits with members of Congress today to clearly advocate for higher tax rates on the wealthy in addition to their advocacy in opposition to any changes to the charitable deduction.”

Ok, well he doesn’t quite speak for all of us, since the deduction does need some changes, as I argued a couple of days ago in these pages.   Nonetheless, Aaron, whom I have known back to his days as an ACORN organizer in Minnesota and Florida knows better and still has to work with these people and get invited to their club meetings from time to time, so this was clearly the best he could do by at least siding with the White House on the need for reform and more taxes on the wealthy, which was miles farther than the rest of these folks and the Independent Sector seem willing to do.

Their position is becoming a shameful case of self-dealing in the face of the clear and obvious need for equity and justice in the country.  How can so many of these big timers like Catholic Charities stand for that?  United Way, who is surprised, since they have been a business plaything for years in countless communities, but jeez!

And, for what?  Even Mitt Romney’s position was better than theirs!

There’s also pretty clear reasons to believe that Aviv and the Independent Sector are fudging on the potential impact of even the White House’s modest proposal to lower the cap on the deduction from 35% to 28% for families with incomes over $350,000 per year.   Also from the Times:

Capping the value of the deduction, as the White House has suggested, might reduce giving by as much as $7 billion a year out of $300 billion over all, according to an estimate by Independent Sector.  But other estimates have proved more moderate. For instance, the Center on Philanthropy at Indiana University last year analyzed the Obama administration’s proposal to increase marginal tax rates and cap the value of charitable giving. It estimated that itemized giving would have declined just 0.4 percent in the first year after being put in place and 1.3 percent in the second. “This suggests a relatively small direct impact, but combined with the weak economic climate, funding reductions and increased demand for services already affecting some nonprofits and their constituents, these changes are likely to have an additional negative effect in the long term,” Patrick M. Rooney, executive director of the Center on Philanthropy, said in a statement.

So, not only is Aaron right and Aviv wrong.  Aviv may be gilding the lily for her big time  backers and padding the facts, when we need a clear and united voice for nonprofits that it is time for more equity and justice for all Americans not just protection of special benefits and deals for Aviv and her buddies.

As Aaron says, “…it is imperative that we get behind the president’s call for higher tax rates on the wealthy.  The majority of nonprofits know this is true…”

Aaron speaks for us.  Please listen to him, not Aviv, and give us tax reform, including reform on charitable deductions!