After Hawaii Gov. Neil Abercombie, a Democrat, saw the fallout from his state’s deduction cap, he signed a bill passed this year by the Democratic-controlled legislature lifting the cap.
The cap was expected to bring in about $12 million to the Hawaii treasury, according to Mallory Fujitani, of theHawaii Department of Taxation. But the provision cost charities $50 million to $60 million in lost donations, according to Tim Delaney, president and CEO of the National Council of Nonprofits. That forced the state or local communities to try to make up the difference, he said, which was often impossible due to lack of funds.
“For every dollar the state was bringing in, it was losing five dollars in donations,” Delaney said. “It’s very difficult for elected officials to say, ‘oops I goofed.’ They had the political courage to come out and say we really blew it.”
“What we learned in the states is that the charitable deduction is not just a nice thing for taxpayers, it’s vital to the communities,” said David L. Thompson, vice president of public policy at the National Council of Nonprofits. “All politicians from across the political spectrum have come to the same conclusion that we are hurting our communities by discouraging giving to charities.”