August 2, 2019 | Read Time: 2 minutes
Lawmakers in the House have introduced a bill that would encourage employers to let their workers create “flexible giving accounts” to donate to charity through pretax payroll deductions. The Everyday Philanthropist Act aims to democratize giving, creating both a social and a financial benefit for employers while also making it easier for small-dollar donors to deduct charitable contributions from their taxes.
Only people who itemize their taxes can claim a charitable deduction. Because the 2017 tax-policy overhaul doubled the standard deduction, the percentage of taxpayers who itemize has dropped from roughly 30 percent to 10 percent. A recent study found that the share of taxpayers claiming the charitable deduction plunged to 8.5 percent last year, down from 24 percent in 2017.
The bill has benefits for employers, donors, and charities alike, says Jennifer Zisser, director of The Greater Give, a nonprofit working to increase giving by cultivating a culture of shared responsibility in the workplace. Employers would pay less in payroll taxes because the accounts would lower employees’ taxable income. Workers — especially those who do not itemize — could lower their taxes by using pretax dollars to give. Charities, in turn, see promise in the vehicle’s potential to increase the pool of donations.
The legislation “puts an economic consideration on the table for the employer,” Zisser said at an Urban Institute event on innovations in workplace giving in late July. “You have the social benefit, which we all know is good and right and needed and necessary, but now you have the financial benefit. For every dollar that goes to that workplace giving, there’s an incentive for that employer to support it.”
The accounts are similar to health spending accounts or other pretax benefit programs for parking or transit that many employers already offer. But Zisser expects these funds would lead to a greater emphasis on philanthropy in the workplace. “You’re going to have that employer lean in, which is going to then cause more energy and more acceptance of workplace giving.”
The proposed funds are not intended to serve as holding accounts. Taxpayers would be able to transfer their funds directly to any 501(c)(3) public charity, though donors could still direct their contribution to a donor-advised fund. Employees’ annual pretax contributions would be capped at $2,700, and there would be no minimum contribution. Additional gifts directed through these accounts would be included in taxable income.
Rep. Vern Buchanan, a Florida Republican, and Rep. Tom Suozzi, a New York Democrat, co-sponsored the bill.
