KUNM

As Tax Bill Moves Ahead, NM Nonprofits Brace For Hit

Dec 7, 2017

As Republicans in Congress iron out the final version of a massive tax overhaul, some nonprofits in New Mexico are bracing for a hit to their budgets.

Nonprofit leaders are worried changes to the standard deduction could lead to fewer people making charitable donations.

Lupe Salazar is director of Barrios Unidos, a community organization in Chimayo. She's wrapping up from an event she organized to give free food to people in the Española area.

"The truck came by yesterday about 10:30, and by then there were already cars parked outside. Because food is a big issue, especially in our area," Salazar said.

One hundred percent of children at Chimayo Elementary qualify for free or reduced lunches. And families here have been fighting an opioid epidemic since the days of the Vietnam War.

Salazar also organizes trainings on how to stop drug overdoses, family support groups, and cultural preservation activities at Barrios Unidos. Family and community ties are unusually strong in this part of New Mexico. Still Salazar says this kind of charitable work plays an important role in keeping the community afloat. She’s one of many New Mexicans who are worried about what the Republican tax plan will mean for the services their organizations provide.

"If they take from these programs, how are individuals going to be able to help themselves, to better themselves so they can be in a place where they can give back to society?" she asked. "We need help, and taking away is not the answer." 

The Republican tax bill does not take away the option to donate to organizations like Barrios Unidos. But it does double the standard deduction. Taxpayers who take that standard deduction won’t have a tax incentive to make charitable donations. 

"We know that many people give because they get a nice deduction on their taxes," said Kristy Ortega, who directs the United Way of Northern New Mexico. United Way uses direct—and, for now tax-deductible—contributions from people in the area to fund programs like Barrios Unidos, the YMCA Teen Center, and behavioral health programs in Los Alamos and Rio Arriba Counties.

"And so just taking away one other revenue stream for nonprofits could be deadly for some. I think that the United Way could withstand it, but those smaller nonprofits, I don’t know. I don’t know that they could make it," she Ortega said.

An analysis by the nonpartisan Tax Policy Center estimates the proposed changes to the tax code could end up costing nonprofits between $12-$20 billion in donations nationally in 2018 alone.

But not everyone thinks things will shake out that way. Congressman Steve Pearce represents southern New Mexico and is a supporter of the tax overhaul.

"I just don’t believe it," Pearce said. "I don’t think people give because of the tax write-off. I think they give because they have compassionate hearts. Compassionate hearts don’t change with tax law."

Pearce is among the many Republicans who feel that cutting taxes for business and manufacturing will lead to a stronger economy overall, and ultimately to more money in people’s pockets—not to a drop in charitable giving.

New Mexico Governor Susana Martinez is in favor of a tax overhaul too, and signed on to a letter of support to Paul Ryan and Mitch McConnell.

But the tax overhaul has infuriated Democrats in Washington. Senator Martin Heinrich says he only got the bill a few hours before it came up for a vote. He posted a photo of the Senate bill, which had handwritten changes scrawled throughout the margins.

Heinrich says he believes there is a danger to nonprofits written into the tax bill. If Democrats manage to score big wins in upcoming elections, he says they might try and reverse the GOP changes to the tax code.

"I think that is something that we should absolutely look at," Heinrich said. "This is a flawed tax giveaway bill—it’s not a tax reform bill—and we will need in the future to actually pass tax reform."

But Democrats don’t have the votes to do much of anything right now. To take any action, they’ll need to regain majorities in Congress—and even then, they’ll have a veto threat from President Trump until at least 2020.

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KUNM's Public Health New Mexico Project is funded by the W.K. Kellogg Foundation and the McCune Charitable Foundation. Find out more at www.publichealthnm.org.