This past week, hundreds of nonprofit leaders gathered in Washington, D.C., to meet with the president’s staff and members of Congress. Their mission: To impress upon our nation’s leaders the dual threat to the fabric of our communities from the possible devastating cuts to domestic discretionary spending through sequestration, and the potential elimination or reduction of incentives for charitable gifts.

While some of Hawaii’s philanthropic and nonprofit leaders have lent their voices to this effort, including the Hawaii Community Foundation, we should all care even more about these issues because Hawaii stands to lose more than most.

Hawaii’s nonprofits, which represent about 9 percent of the state’s work force, rely on a higher percentage of revenue coming from government to carry out a myriad of essential services for our community. During the recession, cuts in domestic national spending as well as state and county support led to an untenable dynamic of trying to make do with fewer resources in the face of skyrocketing demands. A recent study found Hawaii was the only state in the country that saw the nonprofit sector shrink during the recession.

The level of cuts proposed by the budget sequestration would eliminate millions more in support, from housing assistance to child welfare and everything in between. These cuts would come at a time when Hawaii is already reeling from having the second-highest percentage of homeless people and the seventh-highest percentage of people living in poverty among all states.

In addition, current proposals to cap charitable deductions or lower the marginal rate at a federal level would only exacerbate the current situation where, unfortunately, Hawaii enacted such a cap two years ago. According to the Hawaii Alliance of Nonprofit Organizations, Hawaii became the first state in the country to subject charitable donations in an itemized deduction cap. At a time when shrinking government resources and growing demands suggest the need to encourage citizens to do more, our island state has created the opposite message.

One can search the Internet to learn more about various proposals to change or eliminate incentives for charitable gifts, but here are a couple of key points:

>> It doesn’t make economic sense. Locally, calculations by the state place the impact of the charitable deductions cap as generating general fund revenue of around $12 million annually.  Recent studies place charitable-giving in Hawaii somewhere north of $600 million a year. Our analysis suggests that a conservative estimate would place about 10 percent of that amount in jeopardy because of the cap. General fund revenue of $12 million instead of $60 million of charitable gifts does not sound like a reasonable trade-off, especially when a decrease in charitable-giving only places more pressure on government resources in the long run.

>> The charitable gift deduction is the only tax deduction or tax credit that does not benefit the person who spent it. The gift goes entirely to help others and, by law, the giver receives no benefit. Of all the deductions and credits, why would this even be considered in play? It is part of our American fabric to honor and encourage those who help others and this is the only part of the tax code that embraces that sentiment.

At this time of year, many of us consider our relative good fortune and wish to express our gratitude by helping others. Charitable gifts are an efficient and inspiring way to do this, so our public policies should support such efforts and not consider charitable gifts part of a zero sum game. 

Let our congressional leaders know about your views on the federal level, and join us in urging the governor and the Legislature to lift the cap on gifts to charities and return Hawaii to its rightful place as a leader in sharing aloha in our country.