Public Policy Update

Why New Federal Revenues Are Important to Nonprofits
By Henry Bogden, Managing Director of Public Policy & Public Affairs

Day by day reports of budget negotiations in Washington swing from deep despair, to cynicism, to narrow rays of hope. Nonprofits are being 'carpet-bombed' by frantic alerts urging calls to their representatives to protect particular services or tax provisions. And all of these represent valid concerns!

But, and it's a very big "But", the most important decision that will be made affecting the nonprofit community, and the people we serve and care for, is not any one of those particular, specific decisions. The fact of the matter, conceded I think by everyone except those waiting for the tooth fairy or Armageddon, is that sometime in the next year we will almost certainly see a 'resolution' of sorts to address the long-term federal deficit. And that will be a combination of revenue increases and reductions to future spending that totals at least four trillion dollars over the next ten years. That seems inescapable, and no one is suggesting a solution that does not require more budget cuts. The result is that every dollar less raised in new revenues requires an additional dollar in spending reductions.

The President's proposal is based primarily on raising tax rates (not over what they were in the positive economic times of the 1990's) on the most wealthy taxpayers. Most alternatives being offered are significantly less progressive, reducing any impacts on the very wealthy but placing more burdens on low- or middle income taxpayers than the President's proposals. See this recent analysis by the Center on Budget and Policy Priorities for an example. Most of these alternatives would, as a practical matter, raise much less in revenue than the President's, and require more in additional cuts to programs vital to those nonprofits serve.

What many overlook in the present heated debate (particularly those seeking to eviscerate federal domestic programs) is that among the other delights brought to us by the Budget Control Act ("BCA") of 2011 (it also gave us the 'super-committee') are caps on 'discretionary' spending that are now in place for the next decade. Funding under those caps won't be able to keep up with the costs of what was funded in 2012, and funding in 2012 was already inadequate! To make that even more bleak, domestic programs under the discretionary funding caps now in place will also be competing for those resources with growing veterans' health care costs, which are also in the 'domestic discretionary' category.

The result is that every dollar less raised in new revenues requires an additional dollar in spending reductions. (By the way, domestic programs under the existing discretionary funding caps will also be competing for resources with growing veterans' health care costs, which are also in the 'domestic discretionary' category) The size of the new revenue 'package', and how it is raised, will be truly critical to the concerns of our nonprofit community.

This is why Maryland Nonprofits has asked its members to speak out and urge our members in Congress to support the largest progressive revenue proposal practical (currently President Obama's) and to minimize cuts that hurt those in need.