Promoting Social Investment

I serve on the Board of a small nonprofit organization.  This past week, during an executive committee meeting, the Chair noted a disturbing trend in our funding.  The new federal income tax law gives individuals a much higher standard deduction.  As a result, he noted, individuals are less likely to make donations to nonprofit organizations, since that donation is less likely to be used as a tax deduction. The result?  Nonprofits and charities that depend on individual contributions are starting to suffer.

It is intriguing to explore the implications.  On one hand, increasing the standard deduction would seem to promise individual taxpayers an easier and more equitable way to support their government.  A standard deduction simplifies taxes for the majority of Americans.  Only the well-off would want or need to itemize deductions.

But there is another lens through which to view this. A larger standard deduction greatly reduces the incentive for average citizens to donate money to nonprofit social services agencies—from the local library to food banks to the cancer society and other health research and service agencies to museums, and so forth. And, of course, to social rights advocacy groups and other social advocacy groups.  This serves to weaken the impact of these organizations in the community,  It also serves to weaken citizen  investment—that is to say, citizen’s moral investment—and active involvement in social organizations.  That, in turn, weakens the viability of community and, ultimately, democracy, which depends on citizen involvement in society.

Here’s a thought:  Why not keep the standard deduction, but also allow citizens to claim a percentage of that amount as additional deductions for the taxpayer’s contributions to community-based nonprofit organizations?  This would encourage citizen participation in social causes.