Marble Falls The nonprofit sector of our economy is huge. The tattered social services safety net depends on charity. All of which has created a considerable cottage industry of experts and systems to harvest donations. The intentions might be noble, but the implementation often seems more about tax advantages than acts of good will. The billionaire big hitters get the publicity, but a lot of operations depend on the good graces of small, everyday donors for their sustainability. There are some real problems here.
If there was ever a question of whether or not tax advantages were critical to President Trump’s tax code that provided windfalls to the rich while raising the level of standard deductions for all filers, Trump’s own charitable foundation, while it lasted, had already provided a case study in not only tax evasion but repurposing charity deductions for business purposes. For the rest of Americans who actually pay taxes, the changes led to only about 12.2 million filers deducting gifts to charity on Schedule A on the long form in 2021 compared with nearly 40 million for 2017, according to the IRS. Add this to a tightening economy, and many nonprofits have suffered a fallout in both large and small donations. In the progressive world, this has created shortfalls leading to layoffs in a range of organizations from the Sierra Club to the more progressive Justice Democrats that became well-known for their recruitment and support of now Congresswoman Alexandria Ocasio-Cortez.
Increasingly, big charities have experimented with gimmicks. Some of them are working, at least for a while. So-called “round-up initiatives” employed by retailers at US cash registers “raised more than $749 million … in 2022, a 24% increase from 2020.” A startup called Daffy has gotten some publicity by recommending that nonprofits encourage donations based on the numbers in the solicitation if they can match religious, personal, or some other popular connection to prompt giving. Maybe, what do I know?
These are not necessarily affairs of the heart so much as the pocketbook, as companies and the rich seek advantage. Daffy stands for Donor Advised Fund for You. Where donor-advised funds seemed innovative and radical when we were repurposing them under Drummond Pike’s leadership at the Tides Foundation more than forty years ago as a progressive version of a larger community foundation, now they have been twisted into a go-to tax shelter where many rich families create DAFs to park monies with no required charitable payout and little transparency.
The customer donations in the round-up sometimes end up financing corporate branding and image making for their philanthropy not from their sales or profits, but from customers largesse. In the publicized case of drugstore giant, Rite Aid, it’s even hard for customers to get out of the programs. The round-up customer participants don’t get any tax advantages, of course, for their generosity, but the companies can benefit because they are ones actually making the qualified donations to tax-exempt nonprofits. It’s no surprise surveys are finding that consumers are tiring of the constant cash register requests, with support in one case showing a fall from 85% support in 2021 to 73% now.
Face it, a fair and equitable tax system would provide the social services that many folks are fueling with their donations. Those of us trying to build power and create social change are always going to have to hustle for support, but just taxation, especially of the rich, would narrow our targets and let us focus on the changes our people demand, rather than the basic needs that society and the government should provide, and people should have a right to expect.