After the Newtown, Connecticut tragedy, charitable donations have been on the rise. As of December 22nd , the United Way of Western Connecticut had received 2.6 million dollars in donations. Many people have sent letters directly to the victims families, often containing checks or cash. In addition to this, about 60,000 teddy bears, and many other toys, were donated for the holiday season. The people of the town, with an average household income of 111,000 dollars, intend to donate as much as they can to shelters and other charities. According to Postmaster Cathy Zieff, “This is just the proof of the love that’s in this country.” This is just one example of the generosity found across America today. However, with the rapid approach of the fiscal cliff, many are wondering if this trend will continue in the years to come.
Under many proposed fiscal cliff compromises, deductions for charitable donations could be capped at a lower percentage or completely terminated. Under the current regulations, charitable donations are subtracted from the adjusted gross income, lowing the taxes owed. Individuals can receive this tax deduction for up to 50% of their adjusted gross income. This is a significant motive for many Americans and businesses to donate.
Removing deductions for charitable donations could save the country 50 billion dollars a year in tax breaks. Non-profit charities across the nation are worried that removing these deductions will severely impact the number of donations they receive next year. Middle class and lower income families, who make less than 250,000 dollars per year, are less likely to be affected by these changes. Higher income families however, may be placed in a higher tax bracket after any deal to prevent the fiscal cliff is reached. This could significantly affect large donations, and donors who regularly give the same amount year after year. Without the charitable donation deductions, many might decide to use that money for themselves, or save it instead. Some organizations are encouraging donors to give more this year, to make sure that they receive their deductions.
The impending fiscal cliff could dramatically change the lives the less fortunate if charitable donations are significantly reduced. Non-profits and other charities are counting on the generosity and kind hearts of the American populace. They hope that individuals will continue to give, without the motivation of tax deductions.