Most states allow tax deductions for charity donations, but NJ does not. Let’s change that | Editorial

Charitable organizations rely on donations and fundraisers to finance their causes, and the present crisis has put most of these nonprofits – which embody the best of New Jersey — in urgent need of a lifeline.

The example we most often cite on these pages is our venerable network of food banks, which faces tens of millions in deficits because of a system-wide, 50-percent increase in demand. But that is just one example of the gargantuan need. Our state has 34,000 nonprofits employing 324,000 people, which is 10 percent of our private sector workforce, and their mission is largely about serving the community.

So if there’s a way to incentivize New Jerseyans to donate to these organizations, it deserves strong consideration, such as the bill that unanimously passed the Senate last week, allowing taxpayers to deduct charitable donations from their state income taxes.

The bill is bipartisan, co-sponsored by Minority Leader Tom Kean Jr. (R-Union) and the influential Sen. Troy Singleton (D-Burlington), and it could provide a funding boost nonprofits desperately need.

And though some may flinch at the potential budget hit, the benefits probably outweigh the fiscal burden.

Start with this: The deduction is not offered in perpetuity, as is the case in New York, Delaware, and dozens of others states. It would be in effect only for as long as the pandemic lasts, or until Gov. Murphy declares the end of the public health emergency.

Also, those who take this deduction could not give dormitory-wing money to their favorite university. It would be capped at $20,000 for joint filers and $10,000 for individuals.

And the tax break could only be applied to contributions made to New Jersey-based charitable organizations, so the financial benefits stay home.

Those are reasonable guardrails, though it admittedly is a tough ask in such lean times: The nonpartisan Office of Legislative Services said the state will lose between $72.8 million and $124.9 million in tax revenue in this budget cycle.

“There is a budget impact, but it also has an extraordinarily high benefit,” Kean says. “And our charitable groups deserve this boost: They tie this state together, the demands on them have never been higher, and their own needs are growing. This is neighbor helping neighbor.”

The sponsors point out that the money goes further this way, with nonprofits receiving $30 in donations for every dollar of revenue that the state would forgo. One example of the math: The average New Jersey charitable donor resides in the highest bracket, paying 9 percent of his income if he makes more than $500,000 annually. So if that individual gives the maximum of $10,000 to his favorite charity, he could deduct it from his taxes and it would cost the state $900.

Still, that money stays in New Jersey.

The beneficiaries would be our food banks, our animal shelters, our community theaters, and our local foundations.

The proposal might need work on the margins, but it could be a template for what we do going forward: Nearly 40 states allow this deduction annually, and New Jersey might discover that this is something to adopt beyond the 2020 tax period.

The Assembly version is in the Budget Committee, though Speaker Craig Coughlin — whose admiration of nonprofits, notably food banks, is well-known — has yet to weigh in. We hope he posts it soon, however, because time is critical, and this is an investment in things that make our state special.

Linda Czipo, the CEO of the Center for Non-Profits, put it best: “By nature, charities are the only deductions that exist for you to do something for someone else,” she said. “In this case, the money you put into the community is multiplied many times over on impact. And the urgency has never been greater.”

In times of crisis, you get a greater appreciation for nonprofits, and this is one of those times. This bill deserves a chance.

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