March 2017

Crunch time: let’s get smart on Trump’s ‘skinny budget’ and GOP tax plans

With Congress and the White House gearing up for twin debates this spring around proposed deep cuts in social programs and competing tax reform plans, philanthropic leaders are beginning to perceive storm clouds on the horizon.

Chatting with a member about this recently, I remarked that nonprofit leaders—understandably sweating bullets over potential federal cuts and the simultaneous possibility of a drop in charitable giving—will soon be on funders’ doorsteps as the pressure builds.

“They’re already on my doorstep,” she said.

This executive is far from alone, which is why Arizona Grantmakers Forum is hosting Decoding the Federal Budget and Tax Reform Debate featuring Eide Bailly’s Brenda Blunt on April 11. We want to help AGF members cut through the sound and fury coming out of Washington these days to the real policy choices lawmakers are facing and how they will impact the charitable sector and the people we serve.

This is complicated stuff, so we’re fortunate to have a pro like Brenda who can break it down into digestible pieces. I encourage you to join your colleagues on April 11 for this important and timely program.

In the meantime, let me try to set the stage for Brenda’s show.

The perfect storm

As you’ve read in recent news reports, President Donald Trump is preparing to release a comprehensive fiscal year 2018 budget plan that will likely call for massive cuts to the social safety net. The White House’s preliminary budget blueprint—the so-called “skinny budget”—seeks a $54 million military buildup paid for through an equal amount of cuts in domestic spending, including funds for programs that support charitable organizations and the communities they serve.

Meanwhile, last week’s demise of the American Health Care Act threw a monkey wrench into congressional Republican leaders’ plans to overhaul the federal tax code—including possible changes to charitable-giving incentives—this spring.

GOP tax reformers were counting on the savings from repeal of the Affordable Care Act taxes to pay for big tax cuts they want to enact. But even as lawmakers go back to the drawing board on health care, House of Representatives Speaker Paul Ryan, R-Wisconsin, said Friday they will press ahead with tax reform.

And this is where things could get really interesting for philanthropy.

Journalist Ben Paynter suggested in a post-election article that the tax reform plan Trump campaigned on contains a “ticking time bomb for philanthropy.”

The plan Trump released last September limits the tax breaks for charitable donations from middle-class and wealthy taxpayers, potentially resulting in a budget crunch for nonprofits that rely on them for a sizeable chunk of their income streams.

Republican leaders in Congress have sent mixed messages about their own tax reform plans. Some have signaled they want to protect and perhaps even increase charitable-giving tax incentives. Others, including Ryan, have called for retaining the tax benefits for donations without specifying how the rules might change.

Policy changes that threaten charitable giving combined with deep cuts to social programs add up to a monster storm. So if you’re not already having conversations with nonprofit leaders seeking shelter, you will be very soon.

Philanthropy’s role

Foundation leaders and corporate funders will have an opportunity in the coming days to educate the public—and our elected officials—about the part philanthropy can and cannot play in caring for vulnerable people. Your role—as innovators and catalysts—is vital to the social sector. But like your resources, your role is limited. You cannot shoulder the burden of society’s ills alone.

We will need to manage the expectations of our nonprofit partners, policymakers and the public as these debates get underway. But first we must seek to understand the policy choices ahead and what’s at stake for our communities.

AGF is proud to provide a safe space for shared learning and collective action. I look forward to seeing you on April 11 as we decode the debate over the federal budget and tax reform—together.


President and Chief Executive Officer