12/03/2012 02:37 pm ET Updated Feb 02, 2013

Charity Must Prevail

Standing on the edge of the fiscal cliff, in these excruciating moments before we get pushed off or pulled back, we have a brief opportunity to take serious stock of what's really important and what's possibly extraneous to our life as a nation, not merely fiscally but also morally. What are we willing to give up to be the kind of nation we aspire to be in the future -- and do we know what that is?

A fierce dispute about our national purpose is nothing new -- that argument has been going on since Jefferson and Adams. Yet the poisonous political environment of the last decade, with its extreme emphasis on individual self-interest and acerbic attacks on government programs that help people, has had a chilling effect on any idealistic discussion of means to achieve a distinctively American brand of the common good in the 21st Century.

"Habits of the Heart," a phrase first coined by Alexis de Tocqueville, are those American characteristics that signify the ways in which we come together in various ways to build community, to help those in need, to strengthen our society collectively. Among the many examples of American exceptionalism, our historic habits of expansive charity and independent initiatives for the public good -- in education, in health care, in arts and culture, in social service -- should be qualities that we proclaim to the world unabashedly.

Habits of the heart are, alarmingly, on their way to the E.R. Symptoms of distress in our charitable heart have appeared with increasing frequency. Robert Bellah and his co-authors of the landmark 1985 study Habits of the Heart illuminated the social fault lines that have grown wider in the ensuing quarter of a century. The exaltation of individual self-interest over community good was the greatest danger to the American Experiment that de Toqueville foretold, and rampant individualism is a toxic stream polluting much of current political life. When individualism trumps community, compromise is not possible --- as Congress demonstrates all too often, to our national frustration.

Bellah stated the problem this way:

"The American search for spontaneous community with the like-minded is made urgent by the fear that there may be no way at all to relate to those who are too different. Thus the tremendous nostalgia many Americans have for the idealized "small town." The wish for a harmonious community... is a wish to transform the roughness of utilitarian dealings in the marketplace, the courts and government administration into a neighborly conciliation. But this nostalgia is belied by the strong focus of American individualism on economic success. The rules of the competitive market, not the practices of the town meeting or the fellowship of the church, are the real arbiters of living. Yet the public realm still survives, even though with difficulty, as an enduring association of the different.... (Robert N. Bellah, et al., Habits of the Heart: Individualism and Commitment in American Life, New York: Harper & Row, 1985, p. 251)

Hostility to helping people in need -- people often perceived as "too different" -- is a not-so-subtle sub-current under the surface of attacks on "big government." An aspirant to the presidency dismissed 47 percent of the people of the nation as "takers" and the sad reality is that the videotape of that remark does not reveal any one of the wealthy people at that dinner expressing shock or disagreement with that sentiment. The rhetoric opposing health care reform insinuating that people who can't afford health insurance should just go to the emergency room ("Nobody dies because they don't have health insurance") is another symptom of retreat from a sense of justice for those in need. The gap between rich and poor in this nation is at an all-time high, and the rich poured hundreds of millions into the last election to try to keep it that way. Imagine what the one billion dollars spent on political advertising could have done for families in need across the nation.

Now comes the spectre of a more frontal assault on charity -- the potential for a reduction in the charitable gift income tax deduction as part of the "fiscal cliff" negotiations. Reducing or eliminating the charitable gift deduction would devastate thousands of charities and crystallize the nation's long retreat from a clear national commitment to "habits of the heart."

Americans individually donated about $218 billion in 2011 according to Giving USA. A Chronicle of Philanthropy study of IRS data reveals that taxpayers at $50,000 or higher give about 4.7% percent of income with median giving at about $2,500.

Frankly, as big a sum as $218 billion appears to be, it could be even bigger -- and it was in the years before 2008, topping the chart at $233 billion in 2007 before falling off the recession cliff and hitting just $200 million in 2009. Losing $33 billion in charitable gifts over just three years hit the nonprofit world very hard. The last thing the nation's nonprofits need right now is to suffer one more blow to charitable gifts. Already, for many charities that rely on various federal grants to support some of their work, the threat of federal budget reductions through sequestration poses a grave challenge, and likelihood of further fiscal impact by a limitation on charitable gifts could prove deeply harmful or even fatal for some charities.

Proponents of reducing the charitable gift deduction argue that wealthy people in the top brackets who give large gifts receive the most benefits since the gifts reduce their tax liability at their higher tax rate. This argument ignores the plain fact that the real beneficiaries of charitable gifts are the charities, themselves, and reducing donor incentives to make gifts would bring significant harm to charities.

Congress created the charitable gift deduction in 1917 in recognition of the fact that private charitable organizations accomplish certain kinds of work that government cannot do as well, or does not do at all. If the charities did not exist, the government would have to perform the work, often at much greater cost. After the enactment of the 16th Amendment to the U.S. Constitution in 1913 enacting the income tax, Congress grew concerned that the income tax would discourage wealthy benefactors from continuing to support worthy causes that would otherwise cost the government money if they became public projects.

Reducing or eliminating the charitable gift deduction would be a very bad bargain for the nation. Far from saving the federal government lost revenues through the deduction, the result could be even greater public burdens because many of the functions currently supported through charitable gifts would need tax dollar support. Consider, for example, the role that private charitable gifts play in developing and sustaining infrastructure in the nation's universities, art museums and hospitals -- charitable gifts have built a substantial amount of the infrastructure of our great institutions. We still need labs and classrooms and libraries -- who will pay for them when the charitable gifts dry up? A reduction in charitable giving would reduce scholarships for needy students, the availability of private clinics for mothers and children in need, programs that provide job training for the disabled, and protection of wilderness areas that often thrive thanks to private philanthropy.

Private philanthropy is truly the backbone of a good society. It's the very place where the rugged individualists and social justice advocates can come together -- individuals can donate their money to whatever worthy causes they choose and the "do gooders" do good with the money. It's a win-win for everyone involved, most especially, the human lives that are improved immeasurably thanks to the services the charities provide. Come to think of it, most of us have been the beneficiaries of great charitable gifts at one point or another -- enjoying great art in a museum, or a play at the community theater, or the scholarship that made education possible.

Putting philanthropy at risk makes no sense for the nation's fiscal future. Yes, the fiscal cliff requires many sacrifices. But deliberately debilitating the nation's habits of the heart will not contribute to better fiscal health for future generations. Our national commitment to charity must prevail as the best possible witness of this nation's moral commitment to ensure justice for all.