By Sue Santa, Senior Vice President of Public Policy, The Philanthropy Roundtable

The congressional summer recess grants us a moment to pause and think critically about legislation on the horizon. While there are rumblings about energy and education, healthcare is the behemoth that will nearly eclipse the autumn sun.

We can generally expect that a segment of the American people will shoulder the burden of healthcare reform through a mixture of tax increases and reduced tax incentives. Regardless of your personal feelings on the subject, you may want to consider the unintended consequences of this legislation on philanthropy and possibly your corporate giving programs.

A report released last month finds that the response of private giving to tax incentives varies across different types of charities. Changes to the charitable deduction or increasing taxes on the “wealthy” would alter the relative mix of donations received by charities, creating winners and losers.

• The winners: Charities devoted to human services, public and social benefit, and health whose donations appear to be unresponsive to tax incentives.

• The losers: Arts and culture charities, private educational institutions, private foundations, environmental charities, and animal related charities, which are highly responsive to tax incentives.

To put this in context, let’s remember that charitable giving in 2008 fell overall by almost 6 %. Individual giving (which accounts for three-quarters of total giving) decreased by 6.3% and corporate giving (which represents 5% of all giving) was down by 8%.

When one considers that private and corporate foundations provide large grants to many charities, the negative rippling effects of changes to tax incentives become apparent very quickly.
 
In record numbers, colleges and universities are reducing or entirely closing their arts programs.  An estimated 10,000 non-profit arts and culture institutions are at risk of shutting down.  Major institutions, like the Getty and New York’s Metropolitan Museum of Art, have scaled back exhibitions while other noted organizations have closed such as the Milwaukee Shakespeare theater company, the Connecticut Opera, and the Las Vegas Art Museum.

These findings seem to challenge the Obama Administration’s strangely contradictory position that limiting charitable deductions would have a nominal impact on charitable giving while, at the same time, raising federal revenue for health care or other government programs.

More worrisome, state officials are eyeing foundations to cover government slack in programs. A recent New York Times article assessing fallout from the California budget crisis reported that the state’s health insurance program for children, Healthy Families, survived the ax but was cut by $144 million so “thousands of children will probably be on a waiting list for the program unless a private foundation makes up the balance, as the Democratic-controlled Legislature hopes.” 

What?  These are the same private foundations that have LESS money – and already increased demands. Now they’re expected to pick up programs that the state created, prioritized and can no longer afford?

If these are short term impacts, what are the long term implications?  Putting aside doomsday predictions, how will the decline in philanthropic giving impact the landscape and complexion of philanthropic programs? 

Do we sacrifice innovative, risk-taking, visionary programs in exchange for the safe and predictable?