President Barack Obama's proposal to tweak U.S. tax policy has some charities a bit uneasy - despite guidance from philanthropy experts to stay calm.
The scare stems from a provision in the president's budget plan, which reduces the tax savings on wealthy Americans' charitable donations. People making more than $250,000 will see their savings drop from 35 cents on the dollar to 28 cents.
As a result, some charities are afraid they'll see fewer donations from this group. This is especially disheartening for them because donations - regardless of who they're coming from - have dropped off in the current economic environment.
"Nonprofit clients are running a bit scared these days," said Barbara Polston, a philanthropy consultant with Polston and Associates in Phoenix.
Polston said charities should not to get too caught up with the changes, and instead remain focused on their core mission. Most people will give to institutions that have a lasting purpose and sound mission statement, she said. If charities maintain that, they will likely continue to be successful collecting donations.
"Individuals aren't looking at how they spend their dollars any more, they're looking at how they're spending pennies," Polston said. "So it's important for nonprofits to have a specific focus in its operations."
Richard Tollefson Jr. agrees. As president of The Phoenix Philanthropy Group, he advises about 40 clients from around the world. He said that studies show the primary reason people give is the charity's mission, not tax incentive.
"Changes in tax policy are almost always seen as a threat," Tollefson said. "But tax breaks don't dictate what people give. For the majority of them, it's about the connection with a charity's mission."
The numbers back him up. Nearly 60 percent of wealthy households that stopped giving to a charitable organization attributed their change in philanthropic behavior to "no longer feeling connected to the organization," according to a 2008 study done by The Center on Philanthropy at Indiana University for Bank of America.
The study was based on nearly 700 U.S. respondents with household income greater than $200,000 and/or net worth of at least $1 million.
The Chandler nonprofit Assistance League East Valley plans to stay true to its mission. League president Alice Goitia said that no matter what happens in the economy or tax policy, the league will keep working hard to meet the needs of the community.
"We recognize that there is a tremendous need out there," Goitia said. "We intend to help everyone we can."
Individual donations to the league are "low and slow," Goitia said. However, it hasn't stopped the league from putting its energy into its thrift shop at 1950 N. Arizona Ave. Sales at the store are up about 5 percent at a time when many retailers are seeing sales plummet.
The shop's sales have helped the league move forward with its programs. On Friday , the league provided clothes for 60 school children from Children First Academy (formerly Thomas J. Pappas schools) at the Target store on Warner Road and Arizona Avenue. And later this month, the league has plans to provide clothes to an additional 70 students from the Kyrene School District.
Megan Brownell of the Arizona Community Foundation said many smaller charities have been calling the foundation asking for advice. The community foundation has been operating throughout the state for 30 years. Brownell said that charities should not worry about the proposed change in tax policy. Instead, she urges charities to remain dedicated to its cause and to keep in contact with past donors.
"Tax advantages are not the primary motivator to giving," she said. "Charities should stay committed ... and hopefully we'll get through the tough times sooner, rather than later."
