The voices of Urban Institute's researchers and staff
February 22, 2012

Need nonprofits fret about the president’s budget?

February 22, 2012

The federal budget President Obama sent to Congress last week has some in the nonprofit sector worried, but are they fretting about the right stuff?

The president’s $3.8 trillion proposal for fiscal year 2013 includes increased revenues and spending cuts. Revenues in the order of $1.5 trillion will be raised over a decade by allowing the Bush-era tax cuts to expire for high-income taxpayers and putting a cap on their itemized deductions; by raising taxes on the top 1 percent (the “Buffet Rule”); and by reinstating the estate tax at higher levels. Savings include non-health mandatory spending and entitlement cuts and the elimination of hundreds of programs.

Nonprofit leaders and advocates have expressed concern over the suggested limitations on charitable deductions, tax increases for millionaires, and higher estate taxes.

Sue Santa, senior vice president of the Philanthropy Roundtable, told the NonProfit Times, “The president is sending mixed messages to the charitable community. On one hand, he wants to limit the charitable deduction. On the other, he wants millionaires to continue to give to charity while also paying higher taxes.”

“We thought we had turned the corner of the issue, that we had made progress with the administration, only to learn that we are back to square one,” Diana Aviv, chief executive of Independent Sector, told the Chronicle of Philanthropy. Her coalition of nonprofits and foundations opposes policies that discourage private giving and has advocated for preserving the status quo.

The fear is that higher taxes on the wealthy would result in less giving.

The president’s budget is a request that will not be enacted in its entirety. Congress will have its own ideas about what to keep and what to toss out. It is highly unlikely under a Republican-controlled House that the wealthy will suffer higher taxes anytime soon. It is almost guaranteed however, in today’s economic and political climate, that funding of programs will suffer.

And this is where nonprofits should be concerned.

The Chronicle of Philanthropy points out that “the $3.8-trillion blueprint proposes no drastic cuts to social programs. But it proposes few big increases either, despite what nonprofit leaders say is a growing need for services to help people recover from the economic downturn.”

The demand for human services remains strong while funding, from government and private sources, has not kept up with the cost of providing these services. Entitlement and programmatic cuts will further strain human service nonprofits that can barely keep up with the needs of their clients.

Nonprofits should fret, not much about the remote possibility of lost largesse, but about the real threat faced by programs that prop up those at the bottom, the most vulnerable among us.

Photo by J. Scott Applewhite/ AP

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