Will Tax Reform Alter The Landscape Of Jewish Giving?

Less charitable giving to Jewish causes. And a more divisive and politically charged pulpit.

That was the double whammy many Jewish leaders were contemplating this week as they tried to digest the implications of the tax overhaul bill moving at breakneck speed through the Senate.

As Republican Senate leaders tweak the bill to satisfy wavering colleagues, virtually all Jewish groups are convinced it would result in fewer charitable donations to Jewish federations, synagogues, day schools and social safety net programs. In addition, the groups oppose a provision in the House bill that would repeal the 1954 Johnson Amendment, a ban on synagogues, churches and other nonprofits from endorsing political candidates.

“Imagine the divisive conversations that would occur when a congregant says he will increase his contribution if the rabbi endorsed x candidate,” said Michael Lieberman, Washington counsel for the Anti-Defamation League. “This is one of those rare issues that left and

right agree in their opposition to it. The only religious denominations for it are the religious right and evangelical groups. … It has the

potential to be incredibly harmful for religious life, turn people off to charitable giving and create division in the pews.”

There is a fear political groups could set up sham churches in order to get a charitable tax deduction. The nonpartisan congressional Joint

Committee on Taxation estimated that as much as $1.7 billion could be diverted annually from traditional political action committees to political activities at churches and synagogues.

“It is seen as a threat to Jewish communal life as we know it,” Lieberman said.

Eric Fusfield, director of legislative affairs for B’nai B’rith International, said the current law has “helped to protect the integrity

of our institutions and ensured the public’s trust in our ability to perform our mission. There are synagogues and other Jewish organizations that live in fear of their constituencies being divided along political lives, should it be repealed. Changing the law would put these groups at risk of being used as political campaign tools at the taxpayers’ expense.”

Nathan J. Diament, executive director of the Orthodox Union Advocacy Center, said his group is “very engaged with key members of the Senate and House on provisions in the tax bill that will have a significant impact on our community.”

He said the “OU has for many years been opposed” to repeal of the Johnson Amendment and is concerned about “charitable giving to shuls, day schools and a myriad of other Jewish community organizations. Their lifeblood is tzedakah, and we are very engaged in that as well.”

It is estimated the tax bill could cost charities $13.1 billion in donations and possibly result in cuts to federally-funded social safety

net programs to offset the bill’s $1.5 trillion in tax cuts over the next decade.

“The consensus among experts is that when all is said and done, it will be detrimental for charities and philanthropy,” said Andres Spokoiny,

president and CEO of the Jewish Funders Network, which works with Jewish donors to maximize their impact. “The counter argument is that if this plan works as its proponents suggest, people will have more money in their pockets and they may give more [to charity]. It also may create more jobs, which will mean more money in the market and less need for welfare services. … But it’s hard to gauge because changes in the bill could change the impact.”

Of particular concern to charities is the plan to double the standard deduction that taxpayers get in lieu of itemizing to $12,000 for individuals and $24,000 for couples, making it much more attractive not to itemize and simplifying the tax filing process. It would be so simple, according to Rep. Kevin Brady (R-Texas), that nine out of 10 Americans could simply return a postcard if they wished.

Itemizing allows those who make charitable donations to take a tax deduction for that donation. Currently, 30 to 33 percent of households

itemize their tax returns in any given year, according to Patrick Rooney, a tax expert and professor of economics and philanthropic

studies at the Lilly Family School of Philanthropy at Indiana University. He said a study the school conducted found that the tax bill

would reduce that percentage of those who itemize to 5 percent.

“I would guess it would be the top 5 percent, those making $200,000 a year and more,” he said. “Our estimation is that if you double the

standard deduction and reduce the top individual tax rate from 39.6 percent to 35 percent, it will have a deleterious impact on giving. Total

giving from all sources in 2016 was $390 billion, and of that $282 billion came from individuals. People give for lots of reasons and being

able to deduct [some of the donation from one’s taxes] is one reason. It is not rational to believe people give just because of the tax

deduction, but we know it affects how much, where and when they give.”

In a statement, UJA-Federation of New York said it is “very concerned that several provisions in the proposed tax legislation bill will lead

to an overall decline in charitable giving, depriving philanthropic organizations across New York of critical resources that immeasurably

benefit our community every day.”

Steven Woolf, the senior tax policy counsel for the Jewish Federations of North America (JFNA), said another study by the Tax Policy Center

estimated that the drop in charitable giving would be between $12 billion and $20 billion a year.

Woolf said JFNA is trying to convince lawmakers to modify the tax bill to add what is called a “universal deduction,” which would allow

everyone to claim a charitable deduction even if they don’t itemize. One study found that such a change would not only wipe out the $13 billion lost to charities but bring in an additional $5 billion “because everyone would be incentivized [to make a donation]. We are working to get this amendment into the Senate bill by the end of the week. We are asking donors to reach out to their members in the Senate to support it.”

A common complaint of critics is that the tax bill will help the wealthy and hurt the poor, a refrain echoed by Rabbi Jill Jacobs, executive

director of T’ruah: The Rabbinic Call for Human Rights.

She was referring to a provision in the Senate bill that would eliminate

the Affordable Care Act requirement that most Americans have health

insurance or pay a penalty, which would save more than $300 billion over a decade but result in 13 million fewer Americans covered by health insurance. And a projection by the Joint Committee on Taxation found that by 2027, Americans earning $75,000 a year and below would see their taxes rise because individual tax cuts are slated to expire in 2025. The bill would also end the child-care tax credit for 3 million children in low-income immigrant families.

Rabbi Jacobs pointed out that “there are many restrictions in Judaism about becoming wealthy by trampling on others, and this is a tax bill

that gives significant breaks to the wealthy at the expense of those who are most vulnerable and in need of support.”

The Republican premise in lowering the corporate tax rate is that it will encourage companies to repatriate the cash they keep overseas and

then use that money to hire new employees, competing for them by offering higher wages.

Critics say it doesn’t end up working that way.

Marc Stern, the AJC’s general counsel, said he is unsure how changes in the tax code will change giving habits.

“Organizations that oppose [Donald] Trump are swimming in money,” he noted. “The change has the potential to undermine civil society. … If it turns out to be correct that the changes will reduce the amount of funds available to charities, there will be a contraction of civil society and send the message that these things are not seen as important. We’re

talking about museums, advocacy organizations like the AJC, the American Red Cross and groups that advocate for change in the criminal justice system. It’s hard to see any reason for the change.”

Naama Haviv, director of development at MAZON: A Jewish Response to Hunger, said the organization has 30,000 active donors and that the majority of gifts are $54 and $72.

“Those gifts will not disappear if the standard deduction is doubled,” she said, but added that the fear is “major gifts will disappear.”