Obama's Charitable-Giving Plan: What It Means for Nonprofit Groups

Wednesday, March 11, at 12 noon, U.S. Eastern time

Patrick Rooney is interim executive director of the Center on Philanthropy at Indiana University. where he manages the research and writing of Giving USA and the semiannual Philanthropic Giving Index, which gauges and predicts the climate for donor giving and philanthropic activity.

Bruce Flessner is a Minneapolis fund-raising consultant who works with many of the country's largest charities.

Paul N. Van de Water is a senior fellow at the Center on Budget and Policy Priorities in Washington, where he specializes in Medicare, Social Security, and health coverage issues. He is the former vice president of health policy at the National Academy of Social Insurance and a former assistant deputy commissioner at the Social Security Administration. He also worked for 18 years at the Congressional Budget Office

A transcript of the chat follows.

Peter Panepento (Moderator):
    Hello and welcome to today's live discussion on the plan by President Barack Obama to change the federal tax deduction rate for wealthy taxpayers who donate money to nonprofit groups. As many of you know, this has become a topic of intense debate both inside and outside of the charitable community. In response to the interest in this issue, we decided to invite a panel of experts to take your questions on what this change could mean for nonprofit groups, what it will mean for fund raisers, and discuss how it fits into the rest of the federal budget.

Peter Panepento (Moderator):
    We have three experts taking your questions today --

* Patrick Rooney is interim executive director of the Center on Philanthropy at Indiana University, where he manages the research and writing of Giving USA and the semiannual Philanthropic Giving Index.

Bruce Flessner, a Minneapolis fund-raising consultant who works with many of the country's largest charities.

Paul N. Van de Water, a senior fellow at the Center on Budget and Policy Priorities in Washington, where he specializes in Medicare, Social Security, and health coverage issues.

Peter Panepento (Moderator):
    We invite you to ask questions of our guests by clicking on the "ask a question" link on this page and then typing in your query. This is a text-based discussion. There is no audio or video. This page will refresh every minute with the latest material.

Peter Panepento (Moderator):
    You are also invited to post your own comments and reactions to what you see during this discussion. You can do so by using the same "ask a question" tool. Simply type in your comment and I'll make sure it gets added to the conversation.

Peter Panepento (Moderator):
    I have also created a poll for this discussion on our Forums page that invites participants to let us know how they think the plan would affect fund raising at their organizations.

To participate in the poll, please visit the following URL: http://philanthropy.com/forums/index.php/topic,743.0.html

Peter Panepento (Moderator):
    I'll post the results at the end of the discussion.

Peter Panepento (Moderator):
    We'll start with a comment from Chronicle reader Sam Prince ...

Comment from Sam Prince:
    It is absolutely shocking to me that a profession so steeped in counting has totally disregarded the long history of tax rate changes and annual philanthropy totals.

The numbers you see below represent a year - the top marginal tax rate in that year - and the minimum amount of income needed to pay that top rate.

Compare those years with independently verifiable total charitable giving figures and then please tell me exactly why this is such a problem.

We in the world of philanthropy live by one major principle - PERSONAL RESPONSIBILITY. If I am to consider myself a good member of society, I must take responsibility for my own actions. That includes helping to insure the welfare of my fellow members of society. We are going to be asking the government, increasingly, to pay for a lot more social, educational, and artistic benefits than they have for a very long time.

We should be able to take enough responsibility for our own actions to say to the administration, go ahead and do what you must. We will expect you to compensate at the other end.

And, if any of you out there who get paid to raise money actually believe all this hogwash about the negative effects on philanthropy of raising and lowering tax rates, you need to find a different line of work.

If it was easy, they wouldn't have to pay us.

Sam Prince

1932 - 63% - $1,000,000 * 1936 - 79% - $5,000,000 * 1940 - 81.10% - $5,000,000 * 1942 - 88% - $200,000 * 1944 - 94% - $200,000 * 1946 - 86.45% - $200,000 * 1948 - 82.13% - $400,000 * 1950 - 84.36% - $400,000 * 1951 - 91% - $400,000 * 1964 - 77% - $400,000 * 1965 - 70% - $200,000 * 1968 - 75.25% - $200,000 * 1969 - 77% - $200,000 * 1970 - 71.75% - $200,000 * 1971 - 70% - $200,000 * 1981 - 69.13% - $215,400 * 1982 - 50% - $85,600 * 1987 - 38.50% - $90,000 * 1988 - 28% - $29,750 * 1991 - 31% - $82,150 * 1993 - 39.60% - $89,150 * 2001 - 39.10% - $297,350 * 2002 - 38.60% - $307,050 * 2003 - 35% - $311,950

Question from Edith Asibey, Asibey Consulting | Communication and Advocacy Strategies:
    Could this change in charitable deductions serve as a call to action for nonprofits to diversify their funding base? If so, what realistic options do nonprofits have to supplement grants and individual donations?

Patrick Rooney:
    Nationally, nonprofits already receive funding from a wide range of funding sources, including government grants and contracts, fees for services, and donations from individuals, foundations, corporations, and from estates. The overall total, or even averages, however, conceals a great deal of organization-level variation. There are relatively few options for new sources of revenue. Starting new ventures or commercial activities at this time is not a good idea. Most new ventures, for-profit or nonprofit, fail. Before starting anything like this, have appropriate expertise, a lot of strategic planning, and cash reserves. The proposed federal budget does have some potential to fund in specific areas, such as education and health. There may be more opportunities to partner with other organizations, whether for-profit or nonprofit, to offer services.

Comment from Amanda Juech:
    Will there be a transcript available after the discussion? We would like to share with our team if possible.

Peter Panepento (Moderator):
    Thanks for the question. We'll post a full transcript at http://philanthropy.com/live. You'll also find transcripts of all of our previous discussions on that page.

Bruce Flessner:
    I have spoken with a couple people on the Hill within the past 48 hours and they tell me that the members are not hearing very much about the proposed changes. While the news media carry stories about the challenges of the administration's proposal, individual members have yet to see a ground swell of opposition. We all need to contact members of Congress and share with them our concern over any public policy shift that would discourage giving from well to do donors. It will be important for us to push our associations to organize efforts to reach members of the House and Senate.

Question from Regina Mooney, Stoneleigh-Burnham School:
    If it is true that half of the wealthy givers in the U.S. do not give because of the tax deduction, we assume that the other half does.

1. Will they care enough about the reduction in their tax deduction so as to decide not to give?

2. If tax deductions affect the level of their giving, what are you suggesting fund raisers do to offset a potential decrease in gifts and/or dollars?

Patrick Rooney:
    It is worth noting that people give for many complex reasons. A tax deduction typically does not determine whether or not someone gives but may affect how much they give. The best estimates are that the proposed change in tax rates would result in a two per cent drop in itemized contributions, relative to what they would be under the old law. Donations will still go up when the economy recovers. Growth in income and wealth plays a more important role than changes in marginal tax rates. Since the tax deduction proposal would take effect in 2011, you can offer donors a chance now to give in advance of the tax rate change, so that they could maximize their deduction. In any case, practice the best fundraising possible. Present your case for support clearly, so that donors see the impact you are having on the issue you address.

Comment from Craig Weinrich, Nonprofit Coordinating Committee of New York:
    Is there a quick description on what the proposed change is? I've not had time to read articles which is why I'm here.

Peter Panepento (Moderator):
    Hi Craig. Here is a brief synopsis:

President Barack Obama has proposed new caps on the federal tax deduction wealthy taxpayers receive for charitable donations as a way to finance changes in the country’s health-care system.

In a document outlining his 2010 budget plans, President Obama proposed limiting the value of the tax break for itemized deductions, including donations to charity, to 28 percent for families making more than $250,000. In other words, taxpayers would save 28 cents on their federal income taxes for each dollar donated.

That would reduce by as much as 20 percent the amount wealthy taxpayers could get in tax breaks. Under the current system, taxpayers who are in the 33 percent or 35 percent tax brackets use that rate to claim deductions.

The president says the proposal on itemized deductions — which would also apply to claims such as mortgage interest — would raise $318-billion over 10 years. That money would help pay for a 10-year $630-billion reserve fund designed to help make health care more affordable and available.

Some folks in the nonprofit world believe that change would curb donations by individuals. Others believe it would have little impact on donations. Our experts are here today to analyze this plan and offer more information.

Question from Brent Bush, Wheeling Jesuit University:
    Where will the Bush Tax Cuts be resolved, and especially the estate tax marital deduction

Will new income tax replace phased out estate tax?

Paul N. Van de Water:
    The Obama Administration has proposed reinstating the 36 percent and 39.6 percent income tax rates for high-income taxpayers and contintinuing the estate tax as it is in 2009. The estate tax issue will likely be resolved this year, and I expect the estate tax to continue in some form for very large estates.

Question from Layla D. Smith, Wed With Ease:
    Peter, can you give me the brief outline of the changes? I understand that the tax deductions won't be as high. What size donations are we talking about, a specific range amount or all of them?

Paul N. Van de Water:
    The proposal would affect only gifts made by houeholds with incomes over $250,000 who are in the top two income tax brackets. Currently, high-income taxpayers in the top income tax bracket get a subsidy of 35 cents for each dollar of tax-deductible expenses, including charitable contributions. The administration's proposal would cap the subsidy at 28 cents on the dollar.

Comment from Nita Shaw, Cincinnati Zoo & Botanical Garden:
    In regards to Bruce's comments about contacting our Senators, Representatives and the President, the AFP sent out a call to action e-mail this past week with a pre-written message you can send out along with links to Web sites to find your Senators/Reps contact info. I don't know if this is public information but I am sure they would share it with you if you contacted them.

Question from Kathryn Schakel, small non-profit:
    Good Afternoon, gentlemen. I've seen some statistics indicating that many funders are responding to the economic downturn and the Madoff crisis by giving more. Do you think Obama's new rules will impact that trend? How?

Patrick Rooney:
    The proposed rate change does not affect granting by foundations; it can affect donations to foundations. For foundation funders, with asset values so drastically reduced, they can give a larger percentage of their asset value, but it still comes to fewer dollars. For individual donors or funders, in 2011, when the rule changes would go into effect, we hope the recession is over and that people have recovered some from the Madoff situation. If the rate change indeed passes, people giving in 2010 will have an incentive to give more in order to maximize the deductibilty of their gifts under the rate then in force.

Question from Hillarie Logan-Dechene, Paul Smith's College:
    What level of donor is likley to be affected by the proposed changes(what dollar giving amount)?

Bruce Flessner:
    The changes--and let us all call Congress to discourage this proposal--would obviously impact high income donors the most. Therefore, it will impact certain organizations and causes more than others. Colleges, universities, major medical centers and the largest arts organizations receive more major gifts. These important institutions will be impacted more than causes with large bases of small donations.

This does not mean it will only impact multi-million dollar donors, it will impact lots of five- and six-figure donors.

Question from Anne Bergeron, fundraising and management consultant:
    What should we be communicating to our senators and congress people about this proposed legislation?

Bruce Flessner:
    We need to remind them that the very institutions that are addressing the major issues facing the country--access to college, health care for Americans, and science/technology breakthroughs for economic growth are supported by private gifts, especially major gifts.

I would encourage you to not just write your individual congressman/congresswoman, but every member of your state's delegation.

Question from Angela Eikenberry:
    It seems that when we weigh the costs and benefits of the budget plan, and historical evidence, that we are over-reacting to the proposed tax changes. Wouldn't nonprofits (and most of us) come out ahead with the proposed changes?

Paul N. Van de Water:
    Yes, there are many ways in which non-profits would benefit from President Obama's proposals. First, health reform will greatly reduce the burden on hospitals, health clinics, and other charitable organizations to provide free health care to people who currently lack health insurance. Second, small non-profits are likely to find that health insurance for their own employees will be more accessible and less expensive. Third, everyone will benefit from efforts to improve health care quality and slow the growth of health care costs.

Peter Panepento (Moderator):
    I'd like to point to some recent stories we've written about this issue.

Here's one: Obama's Tax Plan Could Cause Giving To Drop: http://philanthropy.com/news/updates/7285/obamas-tax-plan-could-cause-giving-by-the-wealthy-to-drop-by-several-billion-dollars-annually

Peter Panepento (Moderator):
    And another: Half of Wealthy Americans Say Taxes Don't Affect Their Giving:

http://philanthropy.com/news/updates/7318/half-of-wealthy-americans-say-taxes-dont-affect-their-giving-study-finds

Comment from Diane, nonprofit arts organization:
    Are there any colleagues out there besides me who fervently wish that health care was more accessible and affordable, and thus are experiencing considerable ambivalence about whether to express opposition to the proposed changes?

Comment from Thomas Burke, Exec. Dir. Virginia Commonwealth Univ. Foundation:
    I received a call Monday from one of our major donors, he is very upset concerning this proposed change to the tax code. He has challenged us as an institution to oppose this change. We are currently developing a strategy for informing our representatives in Washington. I believe we all need to organize to meet this challenge. We need to protect our donor's right to a full-deduction? I agree donors don't make major gifts for tax purposes however this is truly a benefit that needs to be protected. It's interesting the first call we received about the proposed change was from a donor.

Question from Diane, nonprofit arts organization:
    How can an arts organization weather this economy when donors are targeting "basic services" for their philanthropy?

Patrick Rooney:
    Arts organizations have a tough job in this period. High income donors give a larger share of their giving to the arts than do donors at other income levels. There are some provisions in the economic stimulus package that will benefit arts organizations. Some organizations are able to organize fee-for-service programs (e.g., classes, exhibitions, etc.) to help expand their mission and to generate revenue. Some organizations will find some success doing more with volunteers, although that is not a guaranteed solution because it takes expertise. As a side note, The Barter Theater, in Abingdon, Va., was created in the Great Depression. They are still going, and the case offers an interesting perspective. Admission is whatever gift-in-kind you can provide for the actors.

Comment from Jeff Bombard, Brockton Attleboro College:
    I would suggest that those who are on the border of making $250K a year in 2011 would be likely to give *more* so they could get the better (35%) deduction that comes with making less than $250K, and that giving would help adjust their AGI below the $250K threshold.

Comment from :
    Is this a scholarly discussion? or a political lobby?

Comment from Layla D. Smith:
    general comment: Those organizations who have large-income donors (arts, colleges, etc.) should encourage their donors to pay attention further down the economic scale, further down the food chain. That $0.07 will make a difference to people who normally their donations would not impact. Their donation will not only make a difference to such & such museum or art gallery, but it will also have a very positive impact on the people who are MUCH LESS fortunate. It's $0.07 & has the potential to have a positive impact. Thank you.

Question from Deborah, Arthritis Foundation:
    Are any of our lawmakers looking at ways to encourage charitable giving for mid-range donors to make up for the losses suffered by reductions in support from government and foundations grants.

Paul N. Van de Water:
    Proposals have been made to replace itemized deductions with tax credits, which would be more beneficial to low- and middle-income people, but they are unlikely to be adopted soon. Providing a credit in addition to allowing people to itemize could be costly.

Comment from Layla D. Smith, Wed With Ease:
    Response to Diane, nonprofit arts organization's comment:

Thank you Diane for looking to the benefits it provides to those who are desperately in need of those benefits.

Question from Missy Ryan, Clemson:
    I would be interested in hearing the panel's thoughts on how best to talk about Obama's plans with our major donors.

Bruce Flessner:
    Three points;

1. As we talk with individual donors, we should remind them that the proposals are still in the early stages. The tax rates have not changed and any proposal to change deductions is still being discussed.

2. We know that they did not make their gifts for tax purposes but because they believe in our mission. We also know that they enjoyed the tax deduction and it may have helped motivate the size of the gifts and shape other financial decisions. We hope we will continue to earn their respect, their trust and their gifts.

3. Then stop and listen. For some donors, they don't believe this will ever come to pass. They aren't concerned. For other donors, they see this as another obstacle and will ask questions. For yet other donors it will trigger other concerns they have. By listening carefully you will learn how strongly they feel about shift in the tax code and you should also learn whether they are using uncertainty as an excuse to delay a decision versus being a real issue.

Comment from Janet Troy, Good Samaritan Hospital Foundation:
    Is anyone from AHP participating today? If so, I'd be interested in hearing how the association views the proposed tax changes and the potential benefits of health care reform for hospitals.

Question from Layla D. Smith, Wed With Ease:
    So, $0.35 to $0.28 cents. that's $0.07 on the dollar. Do any of our three specialists think that $0.07 is going to make a difference? If someone does, I'd like to hear from that person why they think it will matter. If they all think not, then what can you tell me of the arguments. Who has said this is a problem? I can't see $0.07 making that much of a difference in a household that makes more than $250,000. Also, the $0.07 change is being utilized to make health care more affordable, and for the other budget issues previously discussed. Anyone who has a household income of over $250,000, should agree that is a good use of funds from the change. You give to give, to help. That $0.07 will HELP in the ways outlined, correct? or, am I missing something?

Patrick Rooney:
    A 7 cent drop from 35 cents is a 20 percent increase in the "cost of giving" for every dollar contributed. Most people buy less when the price goes up by 20 percent, and the same is true for donations. Note that our estimate is that total itemized giving would go down but not by as much as 20 percent. In fact, people would continue to give. The tax deduction is just one of the factors that affects giving. A household with $250,000 income that gives 10 percent of that, or $25,000, would have a $1,750 "cost" increase to the gift. This matters, but is -- as we said -- not the only factor that people consider when deciding how much to give. One important distinction between government policy and private philanthropy is that donors can choose where to give; government policy determines where tax revenue goes. One of the impacts of the proposed change is that individual choices would be replaced by government policy. Some donors will agree with that approach and others will not.

Question from Angela Eikenberry, University of Nebraska at Omaha:
    Before we call our representatives, shouldn't we determine what the overall effects of this plan are on nonprofits? The data on effects on giving are not conclusive, especially if you consider the estate tax.

Paul N. Van de Water:
    That's right. Both Patrick Rooney's organization and mine have estimated that the total effect of the limitation on itemized deductions would be small. In addition, the Obama Administration's proposal to continue the estate tax as it is today (rather than eliminating it or reducing the tax rate to 15 percent) would strongly encourage charitable giving from estates. Most important of all for nonprofits is getting the economy back on track--of which health reform is a critical part.

Question from Anne Bergeron, fundraising and management consultant:
    By your comment, Bruce, it appears that you are not in favor of Obama's proposal. Do you feel that the proposal will negatively impact giving? Bank of America's studies of giving patterns by wealthy individuals for the past few years disavow any connection to tax incentives.

Bruce Flessner:
    I am not in favor of the proposal. First, I find it unusual public policy for the President to address a joint session of congress pushing for health care reforms and returning America's access to higher education to world leadership standards and the same week undertake changes in the tax code that are not helpful to colleges, universities and major medical centers. We all want to improve education, health care and other good causes and believe that philanthropy will pay a major role. We should encourage giving.

Second, while tax considerations are not a primary motivation for making gifts, they often can shape the size and shape of gifts. I do not believe that giving will end with this legislation. The cultural imprint of philanthropy runs deep among Americans. However, any public policy shifts that are not helpful to philanthropy--and nobody believes this is a positive for giving--cause me concern.

Peter Panepento (Moderator):
    A reminder about our poll question about how this proposal would affect giving to your organization. After seeing this debate unfold, what do you think the affect will be on your organization? Cast your vote here: http://philanthropy.com/forums/index.php/topic,743.0/viewResults.html

Question from Kris Howland, Trinity University:
    How would these changes affect the Alternative Minimum Tax (AMT)?

Paul N. Van de Water:
    People who pay the AMT wouldn't be affected by the proposal to limit the subsidy for itemized deductions to 28 percent, since the top AMT tax rate is only 28 percent. The Obama Administration is separately proposing to index the AMT for inflation.

Question from Craig Weinrich, Nonprofit Coordinating Committee of New York:
    These proposed changes wouldn't affect the percent of the amount that is tax deductible correct?. If Joe Sixpack donates $1,000 to xyz nonprofit, and if no goods or services were exchanged, then all of his $1,000 is deductible.

Paul N. Van de Water:
    That's correct.

Question from Diane, nonprofit arts organization:
    Will the proposed changes affect planned giving more than other vehicles for giving?

Bruce Flessner:
    The challenges for planned giving are two-fold. First, planned giving normally involves a serious portion of one's financial assets and any uncertainty is likely to cause delays until it is clear how the congress will eventually act. If the uncertainty delays planned giving decision, it would be a serious concern right now because planned giving has taken on a larger role in giving by serious philanthropists in this recession,

Second, the particulars of each case will determine how much impact the proposed change would have on any planned gift. The vast majority of planned gifts are relatively small and come from the 98 percent of taxpayers that are not suppose to see a change in their tax rates. However, a serious number of planned gifts are from either affluent individuals or individuals making large once in a lifetime financial decisions and they will be impacted.

Comment from :
    According to the new Bank of America High Net Worth Philanthropy study, over 50 percent of wealthy people wouldn't change their giving AT ALL if they received ZERO income tax deductions, and only 10 percent would "dramatically decrease" their contributions. Given than half would still give the same even if they no longer received ANY deduction, it's hard to believe that a 7 percent reduction in benefit among the richest people is going to make that much of a difference.

Question from Diane, Macalester College:
    A lot of the conversation has been focused on the negatives of the proposed tax change. I work in higher education and I am sure that the changes could potentially impact our work with major donors. That said, has anyone given much thought to the potential long-term benefits that this proposed tax change might have on society at-large and perhaps thus on our organizations? Are there some organizations that will benefit from the changes?

Patrick Rooney:
    There is an argument that the current tax system with graduated tax rates (and deductions) gives more benefit for deductions to people with higher income (because their rates are higher). In general, people with higher income levels give a larger share of their income (and larger amounts) to higher education. This is good for education and some other sectors that get higher amounts from the wealthy, but not necessarily good for an egalitarian society. There are other aspects of the plan that help society overall, such as the reserve fund that would be created for health and the administration's proposal regarding the estate tax, which would increase the share of estates going to charitable bequests based on all the empirical research to date.

Canada has put in place an alternative approach using tax credits instead of tax deductions. Like the child care tax credit, this is subtracted from the amount owed in taxes, rather than from income before taxes due are calculated. This means that the marginal rates don't matter. Everybody gets the same value from their credit.

Comment from robert, non-profit:
    "One of the impacts of the proposed change is that individual choices would be replaced by government policy." This statement is false. No proposed change in the tax deduction will prohibit any private individual from making a donation to any cause he/she desires. The generation of more government revenues, allows elected officials to provide funding to a host of concerns, in the case under discussion, health care. With our democratic form of government the 'funding' choices become part of democratic debate. Individual choices still remain. It may or not be affected by rates of tax deductions, but let's be clear that there is no god-given right to be 'rewarded' through a tax break for giving to something an individual holds dear.

Comment from Layla D. Smith, Wed With Ease:
    Response to Patrick Rooney:

Some donors will agree with that approach and others will not.

Then, it is the responsibility of the nonprofit organization to educate the donor. If the charity can convince their donors of the positive impact, that will assist them greatly in their fundraising efforts. I believe those who are best able to educate their donors on the positive impact will see little, if any, change in their collected donations. If nonprofits can successfully shift your thinking, and explain this position to the donor's, my belief is that they will be highly successful in their fundraising and the more successful they are, the more benefit will be derived for everyone impacted by this change.

Question from John Lehr:
    Bruce, Is there a coordinated effort to let Congress know that charitable organizations and their donors are oppposed to the proposed changes.

Bruce Flessner:
    I would urge you to write to AGB, AHP, AFP, CASE and other organizations to both learn of their efforts and to make this a high priority. Quite frankly, this proposal was so unexpected that the associations, like the rest of us, were not geared up to oppose the recommendation.

Question from Craig Weinrich, Nonprofit Coordinating Committee of New York:
    If I understand this correctly, that this proposed change won't necessarily affect how much people give to an organization, but rather affects how much money they will be able to use as a deduction when it comes time for taxes.

For example, the changes won't affect whether or not Joe Smith gives $,1000 or $1,500 to xyz nonprofit, but will affect Joe's deduction levels around April 15th of the following year, if he has an income above $250,000.

Paul N. Van de Water:
    If Joe's $1,000 contribution reduces his taxes by $2,800 instead of $3,500, he may well decide to give a bit less, but that's up to him. Although Joe doesn't have to file a tax return until April 15, he may need to increase his withholding or estimated quarterly payments.

Question from Michelle Robertson, Hiram College:
    We know that donors are not motivated to give for tax reasons, and yet this move may seem to give donors one more reason to decrease their charitable giving at a time when we're seeing top donors reduce their commitments already. What communication strategies do you recommend for dealing with this change?

Bruce Flessner:
    As I have mentioned to many clients, I see three steps:

1. Don't make it a big deal quite yet because its still a proposal. Nobody has changed tax rates or the code. If people ask about it, encourage them to let voice their opinions to elected officials.

2 Remind them that they give to your cause and the deduction is a part of the size and timing decisions. However, keep focused on yor mission and why the college of important. Any gift costs the donor some dollars, so the core motivation must be about mission.

3. Listen more carefully. For some this is not an issue. For some it is an issue. For some it is a good distraction. If they listen well, you can craft your reply.

Question from Dan Schachter, New England Conservatory:
    Being a major gift officer, sometimes the most difficult to get is the first major gift. My experience has been that donors moving up to a new level of giving put in the due diligence assuage any concerns they may have and to make sure they maximize any benefit available to them. Is there an expectation that this policy will deter new major donors or prolong their time table? Also do we know how financial advisors are going change their discussions with their clients in regard to giving once the policy is in place?

Patrick Rooney:
    The proposed change will not deter anyone from being a first-time donor. It is likely to increase major gifts in 2010 (assuming the proposal passes and takes effect in 2011) and may slow major gift donations in 2011 for two reasons. The first is that the tax benefit of the gift would be less and the second is that some of the money would have been given in 2010 to benefit from the tax rates then in effect. After 2012, it is likely to be a little bit harder to get people to move to the next level, although, as noted, the tax effect is not sufficient in itself to make people not give.

Comment from :
    Many donors prefer to let the private sector, including charitable organziations, make decisions about how best to allocate resources for the poor and underserved, assuming, failry I beleive, that it can do this more effectively and efficiently than goverment. Tax policy that promotes this seems like a better option.

Question from Hillarie Logan-Dechene, Paul Smith's College:
    What is the timeline? When might these changes be voted on?

Paul N. Van de Water:
    President Obama and Congressional leaders are hoping to enact health reform this year. Committee mark-ups may begin in the late spring or summer.

Question from Richard Marker, NYU Academy for Grantmaking and Funder Education:
    Mr. Rooney is quite correct that income and net worth are far more determinative of giving than tax tables. He is also correct that there will be a short term impact on giving in a reduction of the deduction. However, it doesn't appear that it will have a long term or lasting impact. More important is the question of whether the non profit sector is on the right side of this question: After all, publicly supported human service funding far exceeds private philanthropy. That means taxes. The macro crisis demands that we establish policies which address the larger economic and human service needs in total and not only the private giving needs of organizations.

Bruce Flessner:
    First, I understand the importance of income and net worth. When The Chronicle asked me--along with a number of others in the nonprofit world--to write a short column on advice to the new President on how to improve philanthropy, I did not suggest a cabinet position or holidays or other ideas. I focused 100 percent on getting the economy fixed. Having a strong base of wealth is essential to giving. I am not an economist so I do not know if the current efforts are the correct course, but I applaud efforts to build a stronger economic base. The issue here is not whether we ought to have a strong tax base, but rather should the tax code, after decades of encouraging giving through the deduction of charitable gifts, be changed? If you think raising taxes is the best course, it could be accomplished without changes in deductions for charitable gifts. I do not believe that anyone is seriously thinking that the public sector has no role to play in human services and other causes, but philanthropy has a unique and important place. I will continue to support public policy decisions that encourage the well to do to voluntarily give away their resources to make the world a better place.

Comment from Angela Eikenberry, University of Nebraska at Omaha:
    Per Patrick's comment about egalitarian society. We should also consider that because high income donors give more to education, health, and the arts (including large institutions — particularly colleges and universities and academic medical centers), raising taxes on big earners might disproportionately hurt those parts of the philanthropic sector but perhaps not other organizations providing social and other services:

A recent study sponsored by Google and conducted by the Center on Philanthropy at Indiana University found “less than one-third of the money individuals gave to nonprofits in 2005 was focused on the needs of the economically disadvantaged. Of the $250 billion in donations, less than $78 billion explicitly targeted those in need.”

Similarly, a 2007 study by the Institute for Jewish and Community Research found that only 5 percent of the total dollars from mega-gifts (gifts of $1 million or more) go to social service groups.

Peter Panepento (Moderator):
    We're nearing the end of what has been a really interesting discussion and debate about this topic. With the hour drawing to a close, now's your last chance to get your voice heard on this topic for today.

Question from Joe Fetcko, Allegheny College:
    Yesterday's NY Times cover article indicated initial resistance from several Democratic House and Senate Committee Chairs. Do you think they are hearing already from lobbying interests?

Bruce Flessner:
    A number of members are concerned about the proposals, but if I remain concerned that too few--especially on the Finance Committee--are hearing from the not for profit sector in the numbers we should rally to our cause.

Please write every member of the Pennsylvania delegation. Remind them that while giving won't cease under this proposal, the President's current plan will not be helpful to Allegheny or many other important institutions.

Question from Nita Shaw, Cincinnati Zoo & Botanical Garden:
    I understand the percentage you can take as a tax-deduction has changed over the years but is this the first time government has said we are lowering the percentage and taking the .07 cents and putting it toward a determined program? Is the problem the drop in the tax-deductible amount or that the money will be put towards only healthcare? An argument is made in the article "Charitable-Giving Plan Divides Nonprofit Groups and Worries Donors" that Obama's plan determines for a donor that he/she will give donations towards healthcare. Thoughts?

Paul N. Van de Water:
    The additional tax revenues wouldn't be specifically earmarked for health care. The goal is to assure that the estimated revenues and cost savings in the aggregate are sufficient to cover the estimted total cost of health reform, so as to avoid increasing the federal budget deficit.

Question from Angela Eikenberry, University of Nebraska at Omaha:
    Bruce, we should discourage the proposal because it might influence wealthy donors to give less? But aren't there many other benefits in the plan that outweigh this potential effect?

For example, if more Americans could afford health care, and could be more proactive in addressing health care concerns, the demand (and costs) for many health and human services provided by nonprofits would go down. People could spend more money on other things like, for instance, the arts or education, or giving more money to charity, rather than spend it on health needs, as more and more Americans must do today. Nonprofits might also come out ahead if heath care is available to their own employees as nonprofits, like other employers, have struggled with the rising cost of health care.

Bruce Flessner:
    I appreciate your point. The primary argument I have heard in favor of the President's proposal is that the stimulus package which is now law and other steps which are still proposals will benefit our organization. I understand, for example, that the increase in NIH funding will help medical schools and improve advances in science.

The issue is how to fund these federal government steps. Asking the not for profit sector, already facing tough fund raising times, to accept limits on charitable deductions from our most generous supporters does not seem to me be the best proposal. From what I read from the administration, the President is open to other ideas of how to fund these efforts.

Again, I do not believe this proposal will kill all giving, but I do not believe it will be helpful to encourage affluent Americans to give more.

Peter Panepento (Moderator):
    Because many of you are just now able to digest the details of this plan, I'll leave the poll question open for a few days and allow folks to determine the impact of this plan on their groups before we show the results.

Remember, you can vote in the poll here: http://philanthropy.com/forums/index.php/topic,743.0/viewResults.html

Question from Sara, Bread & Roses Community Fund:
    What are your suggestions of possible other ways the administration can generate this revenue for our health care system that won't have such a potentially negative impact overall?

Bruce Flessner:
    I am not an economist, just a fund raiser. It does seem to me there are some other options we could consider:

a. One could raise the top tax levels beyond 39 percent and still allow full deductions for gifts; or

b. One could broaden the base of Americans paying for these benefits beyond the top 2 percent; or

c. One could make shifts in spending priorities if health care acess is more important; or d. One could make the entire health care system more efficient. Americans already spend a larger percentage of our GNP than anyone else in the world for a health care system that is full of gaps.

You have asked me a question regarding public investment and spending that is beyond my area of expertise. My major point is that we need to encourage volunteerism (I applaud the President's many PSAs on getting involved) and giving. Philanthropy has always played a key role in health care--from funding some important researchers to building new hospitals. Let us continue to encourage the most financially successful to give.

Patrick Rooney:
    It is clear that tax rates matter, at the margins, to donors under the current system. There are alternative approaches that can encourage giving while increasing the progressivity (the higher tax rates on higher income households). We are not making any recommendations, but as one example, households with income of $250,000 or more could be offered a deduction above a certain level of giving or above a certain percentage of adjusted gross income. While we are not advocating this as a specific alternative or solution to the Obama Administration proposal, we do believe that there are many policy approaches that could be utilized and that this issue deserves much broader discussion and debate before any one policy is chosen to be implemented.

Peter Panepento (Moderator):
    We'll be continuing to cover this proposal -- and what it means to nonprofit groups. If you are interested in staying abreast on what's happening, please sign up for our daily Philanthropy Today e-letter. It will point you to all of the latest stories on this topic (as well as all of our other free content). I also invite you to check out our Government and Politics Watch blog, which tracks what's happening in Washington as it relates to nonprofit groups. You can find it here: http://philanthropy.com/news/government/

Question from Diane, Macalester College:
    How will the proposed changes impact planned giving, where a charitable deduction is adjusted based on the life income a donor is likely to receive from their gift?

Bruce Flessner:
    We will have to wait until the details come out, assuming the legislation moves forward, but it is likely to make a serious shift for the larger planned gifts to Macalester and other colleges.

Peter Panepento (Moderator):
    With that, we are out of time. Thank you for taking the time to join us for what was a very lively and informative discussion about an important issue. A special thanks to our three guests -- Bruce Flessner, Patrick Rooney, and Paul N. Van de Water -- for sharing their knowledge on this issue. It's clear that there are many different opinions on this issue and I hope we were able to provide information that will help you determine how this plan will affect your organizations. Thanks again.