NEW YORK – The Jewish Federations of North America is warning the American Jewish community that federal budget cuts and tax hikes resulting from the fiscal cliff, and from some proposals meant to prevent it, could have a “massive impact” on a range of programs for the needy and vulnerable, including those run by Jewish social service agencies.
If lawmakers fail to pass a deal before the across-the-board budget cuts known as “sequestration” are implemented at the start of 2013, it would mark “a total abrogation by our policy makers and elected officials of their duty and responsibility as public officials,” according to William Daroff, JFNA’s Vice President for Public Policy and the federations’ chief lobbyist on Capitol Hill.
The “fiscal cliff” refers to the automatic hikes in federal taxes and cuts in federal spending that will occur in the new year if Republicans and Democrats don’t agree on a budget deal before that time – or pass legislation to delay the measures in order to give more time for negotiations. Economists believe that going over the fiscal cliff would send the US economy back into recession, likely deepening the economic downturn elsewhere in the world, as well.
According to Daroff, the cuts would “dramatically impact the ability of our country to provide a social safety net for the most vulnerable among us.”
While Medicaid, the national health insurance programs used mainly by the poor, is specifically excluded from the sequestration cuts, many other programs for needy populations are not, including programs for the elderly, the hungry and the homeless.
To prevent cuts to these programs, many of which are run and partially funded by Jewish social service agencies, JFNA has been advocating on Capitol Hill on both sides of the equation – the tax hikes and the spending cuts.
“Our efforts are focused on ensuring that whatever cuts that are made are not disproportionately made on the backs of the vulnerable,” Daroff explains. “We recognize that there will be spending cuts,” but the federations’ role is “to advocate for the needs of the weaker in ours society, including many served by our social services, such as the aging.”
When it comes to taxes, JFNA is concerned about proposals to reduce the tax deductibility of charitable donations, or the amount of tax break given for a charitable contribution.
“There have been proposals from both Republicans and Democrats to raise revenue by reducing the tax deductibility of charitable contributions. We have steadfastly maintained this is an absolutely wrong policy. Government policy should incentivize charitable giving. Any change in the tax code that places a stumbling block in front of charities helping those in need would be the wrong policy,” Daroff insists.
Charitable giving is currently deducted at a rate of 35%. Among the proposals for increasing revenue is to lower that rate to 28%.
Daroff is concerned such a move could drive donors, especially the wealthiest ones, to cut their donations.
“As a federation system, 90 percent of our funds come from the top 10% of donors. People give money to charity for all sorts of reasons, but studies show that the top givers, the wealthiest donors, tend to be extremely tax-code sensitive.”
This is one reason that more than half of the federations’ annual income comes in the last quarter of the fiscal year, and more than 90% of online giving in the very last month. “It’s the end of the tax year.”
With charitable contributions heavily affected by donors’ tax planning, “studies have shown that by reducing the benefits of charitable contributions you reduce the level of those contributions. Reducing the [charitable] deduction from 35% to 28% would reduce donations by as much as $3 billion to $7 billion. Just $3 billion is the annual budget of the top three charities in our country. It would be a significant impact.”
JFNA has two important messages for American Jews: “Communicate to elected officials that the federal tax deduction is important, and should not be reduced at all. And secondly, that as a society and as Jews we have a requirement to care for the vulnerable among us, and whatever cuts are made shouldn’t be made disproportionately on the backs of vulnerable populations. They should communicate that to the White House and their members of Congress,” urges Daroff.
The organization has posted an online “action alert” (http://www.jewishfederations.org/page.aspx?id=259736) with information on contacting Congress and the White House.