President Obama’s proposed jobs bill includes hiring incentives for non-profit organizations, but the incentives are smaller than those offered to for-profit entities – and the accompanying tax increase could make wealthy individuals less likely to contribute to non-profits, an unfortunate side effect at a time when government contributions also are shrinking.
The American Jobs Act would limit itemized deductions for wealthy individuals to 28 percent of income, down from the current 35 percent. Opponents of the bill argue that such a cap will cause individuals to contribute less, which in turn will cause non-profits to cut costs and staff, thus negating the benefits of hiring incentives. One report estimated that the bill would cost non-profits between $2.9 billion and $5.6 billion in lost revenue.
Plus, the incentives for non-profit organizations are smaller than the incentives for for-profit companies. Where a for-profit company could receive an income-tax credit worth up to $4,000 for hiring a long-term unemployed worker, a non-profit would receive a $2,600 payroll-tax credit. And where a for-profit company would receive an income-tax credit worth between $2,400 and $9,600 for hiring a military veteran, a non-profit would receive a payroll-tax credit of between $1,560 and $6,240.
In a document released by the White House, the administration explained that the difference in dollar amounts reflects the different tax liabilities between for-profit and non-profit entities. “When these factors are considered, the value to a non-profit is similar to the value claimed by a for-profit firm,” the document reads.
The non-profit coalition Independent Sector said it will lobby President Obama to remove the cap on deductions and “make the full value of these tax credits available to nonprofit organizations.”