• January 30, 2015

New York Legislature Passes Plan to Limit Charitable Deductions for the Wealthy

Nonprofit organizations across the country are concerned a budget plan passed by the legislature in New York State limiting charitable deductions for “high earners” could catch on with other cash-starved state governments—and Congress—and cause a loss of significant contributions.

The New York plan would limit tax deductions for people who earn more than $10-million annually—about 3,500 taxpayers in the state. They would be able to write off only 25 percent of their charitable contributions on their state income taxes rather than the current 50 percent. The provision in the budget plan run for three years, including the current 2010 tax year.

The charitable-deduction provision could provide up to $100-million in revenue during the current fiscal year for the state, but charities think the change would lead many wealthy people to give less money to charity.

“This is a very dangerous road for New York to be going down in terms of sending a signal to the wealthy that we don’t value their philanthropy,” said Susan Hager, chief executive of United Way of New York State.

“It is unconscionable to be doing this at a time when the state has made spending cuts to human-service programs,” Ms. Hager said. “The state is now moving over to the other side of the ledger and interfering with the private fund raising that agencies need to survive. Not-for-profits in New York are getting whacked time and time again.”

New York nonprofit groups have an ally in their mayor, Michael R. Bloomberg, who said that the “law is about as ill-considered a piece of legislation as I can think of.”

“For a small amount of incremental revenue to the state, they will discourage, consciously or subconsciously, others from giving away money,” he said. “Whether or not other states will do this, it’s hard to see how other states could be so stupid. Hopefully we’re the only one.”

'A Very Attractive Target’

The action in New York could set an example for other states that are looking for revenue during the tough economic times, said Ms. Hager: “The larger set of issues will be: Where will we see this next?”

Tom Riley, vice president of the Philanthropy Roundtable, a Washington association of grant makers and philanthropists, said of states facing tough budget choices, “When they see very high-end donors with big incomes at this time—they are a very attractive target.”

Mr. Riley noted that the Hawaii State Legislature in April passed a tax bill that would have limited itemized deductions on state returns for high-income individuals, including deductions for charitable contributions, medical expenses, and mortgage interest.

Last month Hawaii Gov. Linda Lingle vetoed the measure. “Our community is still feeling the impacts of the recession, and this is the time when we want to encourage donations and contributions to charitable organizations, not enact laws that hinder them,” said Ms. Lingle.

Mr. Riley said that one reason the New York plan sets a “bad precedent for philanthropy is that it’s not just for all the effect it would have on this year’s donors but the effect on future donors as well. New fortunes come up, and some people still do well in economic bad times. If you make charitable giving a less attractive activity, you are going to see less of it.”

He added that the policy could have “very unfortunate long-term consequences.”

Federal Limit Sought

Officials of nonprofit organizations also expressed concern that passage of the New York provision could provide encouragement to members of Congress who are grappling with massive budget deficits and thinking of changing tax laws to find revenue.

In February, President Obama renewed a proposal he made last year to limit the value of charitable deductions for high-income taxpayers. The plan, which was not adopted by Congress a year ago, would limit to 28 percent the tax break couples that earn $250,000 (or individuals who earn $200,000) could get for their itemized deductions, such as charity gifts.

The White House said the change would raise more than $291-billion from 2011 to 2020.

Many nonprofit organizations pleaded with New York lawmakers to reject the proposal on charitable deductions or limit it to one year.

“As a result of a cap, some people will give less, and those who most need the help will be hurt,” said a statement signed by officials of more than two dozen organizations, including the United Way of New York State, the Orthodox Union, the New York Council of Nonprofits, and the Nonprofit Coordinating Committee of New York.


1. smpiccolo - August 04, 2010 at 03:34 pm

Isn't it possible these "high earners" would donate more so that they can get the same tax deduction they would if it was a 1 to 1 match? Maybe that's wishful thinking on my part.

2. ecnyerges - August 04, 2010 at 03:52 pm

I am torn on this issue. On one hand, as an employee with a nonprofit organization I am concerned about how this legislation will affect the quantity and amount of donations coming in to our office.

On the other hand, sometimes the situation become one of "help us help you". With the ridiculous deficits we are carrying at both state and federal levels, can we afford to reject a measure that will potentially raise $291 billion within 10 years? The problem has to be addressed sooner or later, and since there is always someone with a new idea and always someone around to naysay it, if we wait for the perfect solution we will be waiting indefinitely.

As my mother always said, "You can't please everyone." In this instance, the hope is that philanthropists were giving in the spirit of charity, not for the benefit of a tax break. Those that can afford to give, and are inclined to give for the right reasons, will continue to do so, regardless of what they "get out of it" in the end.

3. ecnyerges - August 04, 2010 at 03:57 pm

Just one final thought- perhaps having less aid available will spur those in need to seek their own solution to their hardships, economic or otherwise. You never know what a human being in capable of until the pressure is on and their feet are in the fire. I was a single mother with 2 children and no job- I ate lots of $0.25 per box macaroni and cheese dinners so my children were fed. I lived with friends or relatives, whatever saved money on rent. I lived without any luxuries. I went back to college and applied for every scholarship under the sun, took out loans, and worked my butt off through years of misery to graduate. Now I have a good job, my debts are being paid off, and I learned a lot more about myself than I would have if there had always been someone around to bail me out of the hard times. I know some people's situations are vastly worse than mine, but at some point our history of social responsibility has to give way to a sense of personal responsibility.

4. jberlat - August 04, 2010 at 05:37 pm

Why do gov't always seek to find the fewest number of people to tax. All this effort over 3,500 people. AMT was started over 19 rich people. How about just learning to let the market take its course and stop burdening the rich.

5. davidhorvitz - August 04, 2010 at 05:51 pm

in response to smpiccolo; you've got to be kidding!

6. darrylbrown - August 04, 2010 at 06:27 pm

On the other hand, hedge fund managers got a break (no new taxes as drafted), as did film production companies, soft drink companies, and others who could absorb potential losses better than charities.

And don't think this is merely a NY issue -- in these days of pinched state and municipal budgets, legislators from across the country will keep an eye on this and its impact and are looking for ways to stealthily raise tax revenues. The $10M earner (the threshold set in this budget) in New York, may be your $250K prospect in Peoria in the next budget cycle or two!

7. mikejohn860 - August 05, 2010 at 06:30 am


On the other hand, sometimes the situation become one of "help us help you". With the ridiculous deficits we are carrying at both state and federal levels, can we afford to reject a measure that will potentially raise $291 billion within 10 years? The problem has to be addressed sooner or later, and since there is always someone with a new idea and always someone around to naysay it, if we wait for the perfect solution we will be waiting indefinitely.

Want to get-on Google's first page and loads of traffic to your website? Hire a SEO Specialist from OceanĀ GroupsĀ  [url=http://oceangroups.org/]seo pecialist [/url]

8. smdavid83 - August 05, 2010 at 10:23 am

In response to "Ecnyerges", as somebody who has also had to navigate the profoundly challenging circumstances of a low-income family, I know that I could not have done it without assistance from the community, other tax paying citizens, and society in general. We all have the personal responsibility to be more socially responsible. I think it's bunk to thing that helping people prevents them from working hard. And it is it right to make people work so hard that the drive themselves into the grave just getting by? We are in our current current situation because of the very fact that social responsibility has given way to personal responsibility. Everyone, including those at the very top and government, have been quite socially irresponsible, while some may argue being "personally responsible" for their own well being and agenda. We do need more personal responsibility, but we need it in a more social context. Without it we will have more of the hyper-competition and the hyper-individualism that has driven this country in the wrong direction. "Personal responsibility" is often used as a proxy for, its "your own fault for your own conditions" and absolves us all of being more socially responsible. I would argue that our "history" of social responsibility is quite grim, and that as a society we have not been socially responsible enough.

Add Your Comment

Commenting is closed.

  • 1255 Twenty-Third St., N.W.
  • Washington, D.C. 20037
subscribe today

Raise more money and increase awareness with trusted insight.