Tax Framework puts communities & nonprofits at risk


To build a prosperous future, we need a tax code that strengthens essential programs, values the partnership between nonprofits and government, and helps nonprofits to achieve their missions through the promise of nonpartisanship.

The Framework for Reforming our Tax Code released last week gives us great concern. Current tax reform proposals could put essential programs at risk, significantly decrease charitable giving, and threaten nonpartisan protections that make our sector trusted by communities across the country. 

These tax proposals put essential programs at risk.  

Key legislators agreed to produce a budget resolution that would allow a tax reform package to increase the deficit by $1.5 trillion over ten years, potentially fueling higher deficits. Those higher deficits are likely to fuel the narrative that we see again and again:  that deep cuts to government programs that benefit communities nation-wide are required to solve our country’s financial troubles.

Nan Madden from MCN's Minnesota Budget Project explains it this way:

In the House, the budget vehicle that is being used to advance the tax framework calls for cuts in federal services that help families afford the basic necessities – such as Medicaid, Medicare, and food assistance through SNAP. And under the Senate’s budget framework, $1.5 trillion of the tax plan’s cost would be added to the deficit, creating additional pressure down the road on anti-poverty programs as well as other federal priorities.

We believe that putting essential services at risk to benefit the extremely wealthy and corporations is not a reflection of our values as a nation.

These proposed changes are built on the notion that in order for a strong civil society, including the nonprofit sector, to thrive, the government must retreat. That is simply not true.  Strong civil society comes from working partnerships and authentic relationships. Government is an essential partner, and any retreat from that role undermines the interconnected communities we are building. 

These proposals reduce incentives for charitable giving.

Under United States tax law, the standard deduction is a dollar amount that non-itemizers may subtract from their income before income tax is applied. Taxpayers may choose either itemized deductions, such as the charitable deduction, or the standard deduction, whichever results in the lesser amount of tax payable.

This proposal includes policy changes that will likely reduce the amount of giving, despite claims that the charitable deduction will remain untouched. The framework wants to reduce the top tax rate on individuals, as well as doubling the standard deduction.  These two proposals would work together to decrease charitable giving by over $13 billion annually.  The charitable deduction has been included in current tax reform proposals, but efforts to increase the standard deduction and lower rates have the unintended consequences of limiting the effect of the charitable deduction and reducing giving.

Additionally, the plan calls for the elimination of the estate tax, a vital tax incentive for charitable giving.

Undermining the Johnson Amendment.

And finally, some proposal threaten the promise of non partisanship of nonprofits by undermining the protections of the Johnson Amendment. If nonprofits are no longer able to promise non partisanship, our ability to serve communities and partner with government is drastically reduced.            

We have seen meaningful attempts to undermine the Johnson Amendment recently from a House appropriations bill that places undue burdens on the IRS to enforce the Amendment, as well as an executive order that questions that value of it.

In light of those alarming policy movements, the nonprofit community is concerned that language around “simplifying” the tax code will include language that threatens the Johnson Amendment, and its guarantee of non partisanship in the nonprofit sector.

For advocacy tools surrounding the charitable sector, we recommend using the resources assembled by the Independent Sector

MCN’s Minnesota Budget Project is also working on the impact of these policy proposals