Q: It seems everyone I talk with in our sector is uncertain about the impact the election will have on our agencies and clients. Our organization is especially concerned because we deal with a marginalized population. Do you have any insights into what we should expect with the Trump presidency?
A: Where is Carnac the Magnificent when you need him? I doubt anyone knows for certain what the impact will be. But, while my crystal ball is probably as cloudy as yours, I have been doing a fair amount of reading and have attended some panels on this subject. I am happy to share a few of the things I’ve learned from others far more immersed in this than I.
It is likely that tax reform will be one of the first things President-elect Trump will initiate once in office. While he will probably retain the charitable deduction, he has proposed capping itemized deductions at $200,000 for married-joint filers and $100,000 for single filers. At the same time,he has suggested increasing the standard deduction significantly. Taken together, these two factors lessen the appeal to donors of itemizing their charitable giving.Since House Republicans have already made similar recommendations regarding tax reform, such a proposal will likely sail through Congress.
Trump has also pledged to do away with estate taxes, which is apt to reduce people’s motivation to make charitable bequests. The Congressional Budget Office calculates that if the estate tax is repealed, we will probably see a 16 to 28 percent reduction of such bequests.
On Smaller Government
With a Republican President, Senate and House, the Party’s signature call for smaller government will almost certainly turn to action rather quickly. For years now, nonprofits have been asked to pick up the slack when government programs are slashed. One can assume that members of the incoming administration will continue to say “leave it to the nonprofits.” Yet, there will undoubtedly be less money to aid the nonprofits taking on these programs. Trump’s plan to reduce federal spending is expected to result in $800 billion in cuts over the next 10 years – exclusive of the military and entitlement programs. Already, we’ve seen government grants and contracts covering less and their payments arriving later and later, requiring nonprofits to lay out money they don’t yet have to meet required commitments. This situation is likely to get worse. Those in human services, health-care, education and the arts are most likely to feel the pinch.
The Johnson Amendment, which prohibits nonprofits from getting involved in partisan politics, is already on the chopping block since Republican lawmakers introduced a bill to repeal it. Trump campaigned on ending the law, which prohibits exempt organizations from “participating in any political campaign on behalf of – or in opposition to – any candidate for public office.” His reasoning is that it unfairly limits the free speech of churches and their religious leaders. If Trump continues to push for the law’s demise, the end of this 60-plus-year old law is expected. One major concern is that the repeal could force nonprofits to pay to play – that is, to make donations to politicians for access to their offices.
On Regulatory Reform
Trump has indicated that he will end or make significant changes to the regulations and executive orders instituted by the Obama administration. Among other things, he pledges to lessen regulations on the environment, repeal and replace the Affordable Care Act, overturn abortion, stop most immigration and deport the illegal immigrants already in this country, as well as reverse Obama’s directive to schools that currently encourages them to provide appropriate bathroom facilities to individuals based on their gender identity or risk losing Title IX support. Many of our country’s nonprofits – like yours – exist to protect people who may be negatively affected by these proposed changes. They could be inundated with calls from clients concerned for their personal welfare, diverting the organization’s time and efforts from the provision of other services. And, they will most certainly be forced to spend more money to provide services that are no longer provided elsewhere.
This being said, you will have to wait to see how things actually play out. We are part of a very large and diverse sector, with different organizations requiring and benefitting from different things. Further, stump speeches and campaign rhetoric typically give way to the realities of the world at the given time and place. It is possible that none of these projected situations will occur, or those that do will have less of an impact than the pundits suggest.