Note: This article was updated Friday at 10:45 a.m. with analysis from the Tax Policy Center.
Democratic presidential nominee Hillary Clinton still appears likely to win Tuesday’s election despite recent setbacks. But the polls have tightened considerably, leaving many observers bracing for anything.
It’s impossible to predict precisely how nonprofits would be affected by either candidate, but for many nonprofit leaders, concerns center on Donald Trump. The GOP nominee has called for steep reductions in federal spending and for limiting incentives for charitable giving. Nonprofit experts also worry that Mr. Trump could sow economic uncertainty, which would hurt giving.
Some nonprofit leaders are also wary of Ms. Clinton’s plans to raise taxes on the wealthy, which might reduce how much the rich can give.
The Chronicle reviewed Ms. Clinton’s and Mr. Trump’s public statements and analyses of their tax plans and spoke to several experts about how each candidate might affect nonprofits. Here’s what they said.
Spending: Ms. Clinton’s proposals would increase federal spending by $1.65 trillion over 10 years, with a focus on education, heath care, child welfare, and infrastructure, according to the Committee for a Responsible Federal Budget. Many nonprofits depend on government funding, and increases in federal spending might mean a boost for some charities, says Patrick Rooney, professor of economics and philanthropic studies at Indiana University’s Lilly School of Philanthropy. However, he notes, more government funding could “crowd out” private donations, either because charities stop focusing on fundraising or because people begin to believe that government support is replacing their giving.
Mr. Trump’s plan would cut nondefense discretionary spending by 1 percent annually, for a total reduction of $800 billion over 10 years. Human-service groups, health care-organizations, and educational institutions would likely be hit hardest by such large cuts, Mr. Rooney says, as they are the most dependent on government funding.
Also, if more people are removed from welfare programs, they will need more services from nonprofits. “If you cut back on government spending, charities could be asked to pick up the slack and not have the resources to do it,” said Roger Colinvaux, a professor at Catholic University of America who specializes in nonprofit tax law.
It’s difficult to gauge whether Congress would accept either spending proposal, experts say. Republicans, who will likely retain control of the House, are sure to oppose tax increases that would largely fund Ms. Clinton’s plan. Democrats, if they win control of the Senate, might block major cuts in services.
If Republicans control both chambers of Congress, a Trump administration would have an easier time passing tax and spending cuts.
Charitable-giving incentives: Ms. Clinton’s tax plan retains current incentives for giving, although some of her policy advisers have privately pushed for limiting them, said Steve Taylor, counsel for public policy at United Way Worldwide, citing conversations he’s had with the Clinton campaign.
Mr. Trump’s plan would limit all deductions, including for charitable donations. However, Mr. Taylor said he’s spoken to people in the Trump campaign who say some policy advisers are opposed to changes to the charitable deduction.
Regardless of who wins, charities should remain vigilant in their calls to maintain current giving incentives, Mr. Taylor said.
He noted that the Obama administration has included limits to the charitable deduction in its budget proposals for years, but those limits never passed Congress.
Taxes: Under Ms. Clinton’s plan, households with adjusted gross incomes more than $1 million would pay a minimum of 30 percent in taxes, with those making over $5 million paying an additional surcharge of 4 percent.
With current incentives in place, such increases might spur giving in the short-term, as higher tax rates would increase the value of tax charitable deductions, Mr. Rooney said. Over the long-term, however, some argue tax increases hurt giving because the rich would have less money to donate. However, economists disagree over how large a tax increase it takes to curtail giving, Mr. Rooney said.
In an analysis released today, researchers at the Tax Policy Center said Ms. Clinton’s plan, if adopted, would reduce charitable giving in 2017 by 2 percent to 4 percent, or $6 billion to $11.7 billion. That’s largely because tax hikes would reduce wealthy people’s incomes and because her plan calls for a 28 percent cap on all itemized deductions — although that excludes charitable contributions. Even with current giving incentives in place, a cap on deductions might compel some households to opt for the standard deduction over itemizing — which could eliminate their incentive to give, according to the analysis.
Conversely, some say that Mr. Trump’s plan, which includes large tax cuts for the wealthy, would stimulate more giving in the long-term. But Mr. Rooney thinks such claims are probably exaggerated.
The Tax Policy Center analysis says Mr. Trump’s plan would decrease charitable giving in 2017 by at least 4.5 percent and by as much as 9 percent, or by about $13.5 billion to $26.1 billion. That’s largely because his call to lower taxes would raise the cost of giving by lowering the value of charitable deductions and because Mr. Trump has proposed increasing the standard deduction, which would reduce the number of people who itemize. Mr. Trump’s proposed cap on itemized deductions would also eliminate many wealthy households’ incentive to give, according to the analysis.
Economic growth: It’s difficult to know how Mr. Trump’s economic proposals would affect the economy. Some predict that the stock market would decline immediately if he wins, although Mr. Rooney thinks markets would correct themselves fairly quickly in the event of a sell-off.
Some worry Mr. Trump would take action on his anti-trade rhetoric, which has included calls to scrap trade deals and impose tariffs on foreign goods. If Mr. Trump imposed dramatic changes to U.S. trade policy, that could be very disruptive to the economy, Mr. Rooney said. Some reports say that Mr. Trump would have broad powers to alter trade policy without Congressional approval.
That’s important for charities, because charitable donations rise and fall along with economic growth. Giving tends to hover around 2 percent of gross domestic product each year, according to “Giving USA,” an annual report on American philanthropy.
Ms. Clinton’s economic plans are not as dramatic, Mr. Rooney says, and many analysts are less worried about economic flare-ups associated with them.
Other Things to Watch
Nonprofit politicking: Mr. Trump has called for eliminating a law called the “Johnson Amendment,” which prevents nonprofits from engaging in partisan politics. He said eliminating the law would free churches and Christian leaders to endorse political candidates. But eliminating it would, in effect, allow for anonymous, tax-deductible political contributions to 501(c)(3) charities, said Mr. Colinvaux, the Catholic University law professor. Recently, a bill that would roll back the Johnson Amendment was introduced in Congress, he noted, which means it might have some support among lawmakers.
Ms. Clinton has not made a similar proposal.
Candidates’ charity controversies: Both Ms. Clinton and Mr. Trump have been involved in high-profile controversies concerning charities that bear their names. Republicans charge that Ms. Clinton gave access and favors to wealthy foreign donors of the Clinton Foundation while she was secretary of state. Mr. Trump has been accused of using funds from his private foundation to benefit his businesses and has allegedly taken credit for charitable donations that did not include his own money.
Some experts predict that Congress might open investigations and oversight hearings into both charities following the election. If that happens, the proceedings should be closely monitored by nonprofits, said Adam Meyerson, president of the Philanthropy Roundtable, adding that Congress could overreact and propose remedies that might hurt nonprofits broadly.
