President Barack Obama may be confident about his budget plan for next year, but his proposal is leaving some at the University and in the nonprofit community uneasy about the impact it could have on donations.
Because of a tax change outlined in Obama’s proposed budget plan, couples making more than $250,000 jointly each year would not receive as large of a tax write-off for donations to nonprofit organizations, like the University. Because of this, some on campus think the University could see fewer or smaller donations next year.
Prof. Joel Slemrod, who teaches business and economics, explained Obama’s proposal by saying it would cost approximately seven cents more per dollar for couples making more than $250,000 to make a donation.
“If you’re in the top bracket and … you’re an itemizer, right now it costs you 65 cents to give the University of Michigan a dollar,” he said. “Under this proposal, for that group of people, the cost of giving a dollar goes up to 72 cents.”
In a press conference Tuesday night, Obama defended the tax plan saying it would level the playing field so anyone giving a donation qualifies for the same tax credit.
“People are still going to be able to make charitable contributions,” he said in response to a reporter’s question. “I think it is a realistic way for us to raise some revenue from people who benefited enormously over the last several years.”
Slemrod said although the proposal has concerned many nonprofits, it would likely have a very small impact on donations to the University.
“Charitable organizations are concerned that the increased price will reduce the amount of donations they get,” he said. “It will probably have some negative effect, but I imagine the impact on giving will be quite modest.”
Judy Malcolm, director of development communications and donor relations for the Office of Development, said the University has been monitoring the situation closely, and it is primarily donors who make large, capital contributions that would be affected.
“We know that a lot of our major donors are going to be negatively impacted by this change,” she said.
Although studies from The Chronicle of Higher Education, The Chronicle of Philanthropy and The Wall Street Journal estimate donations could decrease by 1.3 to 4.8 percent, Malcolm said she believes donors would continue to give to the University.
“In general, we don’t think there’s going to be a huge decrease in giving to the University,” she said. “We really feel that most of our donors aren’t going to stop giving because of this and that (the tax benefit) isn’t their prime motivator.”
Instead, Malcolm said the University’s development operations will continue to promote the University’s mission to potential donors.
“We think it’s important right now to make it clear to donors that the University of Michigan is still educating students just like we were a year ago,” she said. “We’re still conducting fantastic research. We’re still working hard and doing what we do.”
Malcolm said the University will continue to monitor the situation, but at this point it doesn’t appear that the tax deduction change would have a major impact on giving.
Shari Fox, a development executive who works with major gifts to the University, echoed Malcolm’s comments and said if the proposal passes in its current form, she doesn’t expect it will have a major effect on the University.
Fox said the only difference the University may experience if the new tax law passes would be a short-term increase in donations for 2010 by people trying to push their donation through before the law goes into effect.
A donor considering a major contribution may give the gift, or a larger part of it, the year before the tax change so they qualify for a larger deduction, Fox said.