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Compromise over fiscal cliff could hurt Vashon’s many nonprofits | Commentary
Recently, I watched the PBS NewsHour commentator David Brooks, a columnist for the New York Times, discussing the upcoming fiscal cliff, which may occur by Dec. 31 if Congress doesn’t act.
Brooks said a few things that made me sit up straighter in my chair: First, he’s pessimistic that Congress will enact legislation to prevent this cliff of more than $600 billion in spending cuts and increased taxes; and if that’s the case, everybody’s taxes will increase. But if a compromise is reached, he noted, it might include an end to tax deductions for mortgage interest and charitable contributions for those in the highest income brackets — another cause for concern.
As an active volunteer since 1993 in Vashon nonprofits covering education, the arts and environmental work, I’ve heard how the changes in state and county funding have hurt them in the past. But this fiscal cliff sounds like a perfect storm: It could mean more spending cuts and tax increases for all Islanders, leaving less disposable income for donations. Or, if Congress opts to put a ceiling on charitable tax deductions, it could lead to limits on the amount of funds donated to our vital nonprofits. I decided to do more research to understand the implications of what Brooks had said for local nonprofits and those they serve.
I asked Tom Dean, executive director of the Vashon-Maury Island Land Trust, what he thinks about a potential ceiling on the charitable tax deduction. “I don’t think this will change people’s giving patterns much, but the real issue is the size of the gift,” he said. He went on to explain that Islanders who want to donate a conservation easement or a parcel of land might not be able to deduct the full value of their donation.
Molly Reed, executive director of Vashon Allied Arts (VAA), shares Dean’s concern about the size of the gifts.
“Although King County building permits for the Vashon Center for the Arts should be issued next spring, some donors might hesitate to make substantial donations due to limited deductibility. We count on the 20 percent of donors who make 80 percent of the donations,” she said, “and that 20 percent are probably the upper income bracket donors who will be most affected.”
However, if Congress doesn’t find a compromise and the country ends up going over the fiscal cliff, our nonprofits — and some of our most vulnerable citizens — would likely face a whole host of other problems on Vashon.
“This is the wrong way to go,” Diane Kjellberg, interim executive director of Vashon Youth & Family Services, said of the possibility the country would go over the cliff. “Federal, state and county grants that provide our funding have already been severely impacted, and if we go over the fiscal cliff, current funds will be greatly eroded. It’s heart-breaking that the proposed cuts to Medicare and Medicaid will cripple our ability to serve the Island’s most at-risk population.”
In the meantime, as I listen to NPR and discuss this issue with friends, the political bickering over this serious issue makes me feel angry and more confused: Will Congress reach a compromise? Assuming it does, would I be smarter to donate more this year, or not?
So I called Seattle tax attorney and artist Ted Kutscher and told him about my concerns and questions about the charitable tax deduction and its possible impact on Vashon nonprofits. He agreed to talk with me and any other concerned Islanders so we can understand more fully the implications of various scenarios playing out before Congress.
— Amy Huggins currently serves on VAA’s Vashon Center for the Arts campaign cabinet.
Ted Kutscher, a Vashon resident and Seattle tax attorney, will discuss this issue and others at a talk called, “Cliff Notes on Charitable Giving: Implications of Potential Tax Code Changes for Donors and Nonprofits.” The discussion, sponsored by Vashon Allied Arts, will be held at 7 p.m. Wednesday, Dec. 19, at the Land Trust Building.