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Posts Tagged ‘UN’

In their rush to gain an end of the year tax deal, elected leaders postponed hard choices. In the process, they denied the government the revenues it needs to either respond to unforeseen crises or deliver on promises made.

At the same time, wary corporate decision-makers reported that uncertainty over tax and fiscal policy had discouraged them from creating jobs or making R&D investments essential to prosperity.

As self- imposed constraints limit the agility of these two important sectors, a third—the non-profit sector—worries that the 2010 Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act may have a cascading effect, further impoverishing state and local governments, shifting the burden of providing social services from the public to the non-profit sector. Moreover, its leaders fear that the estate tax provisions may reduce incentives for wealthy individuals to make the no-strings-attached donations and bequests that free the sector from the constraints of politics and markets.

Our tax structure has long reflected the value we place on the nonprofit sector’s ability to take risks and try out new ideas without fear of political or market reprisals. Income and inheritance taxes have encouraged donations and bequests, as well as the creation of tax-exempt foundations. As a result, our nation has a diverse charitable sector comprised of grantees and grantors who are tackling issues at home and across the globe. Free from the need to garner votes or generate profits, they needn’t test the political winds before offering services to the most marginalized Americans. Their reach extends to the developing world, where they have created or supported “social enterprises” with for-profit business models for providing off-grid communities with renewable sources of energy. And, globally they have even entered into public-private partnerships to effect high policy, as Warren Buffett did in making his $50-million gift to the UN’s politically-hampered and resource-strapped International Atomic Energy Agency. That grant will help to create a “nuclear fuels bank” upon which states committed to nonproliferation can draw to meet their energy needs.

Whether the tax deal will limit the freedom of non-profits to achieve such salutary outcomes is a matter of intense debate. But, it is up to us to ask and answer that question before the law’s review in 2012. An election year is a particularly poor time for political risk-taking. Policy-makers will need to be armed with the facts, and buttressed by a clear and unswerving sense of the sector’s purpose.

First the data: The law extends several provisions that can affect charitable giving—and provides time to gather data on their effect. It extends Bush-era tax cuts at all income levels and continues favorable treatment of capital gains and dividends. It delays a requirement that high-income tax-payers reduce their itemized deductions, including for charitable gifts. It exempts older taxpayers from treating up to $100k gifted to charities from their IRAs as taxable income. But, what worries some nonprofits is the 35% cap it places on inheritance taxes, while exempting estates of $5m or less. Many analysts argue that these estate tax provisions will remove incentives for bequests as well as giving-while-living aimed at reducing the size of the taxable estate. Others contend that estate tax considerations play a negligible role in the decision to give, but can influence the size of the gifts made. They draw on the 2004 predictions of the Congressional Budget Office, which anticipated a drop off in the number and size of bequests. Indeed fewer dollars were donated in this way during the phase-out of the estate tax, from 2008-2009. But, that year’s economic contraction is likely to have had far greater effect. More time in an improved economic climate can yield more data on which policymakers can base future choices.

And, the purpose – As we undertake that analysis, it is essential that we come to a shared view of the reasons for charitable organizations, and their tax-exempt status, in the first place. Americans value nonprofits because they can take actions and generate ideas that may be unwelcome, unpopular, and unprofitable in the short run, but produce true societal benefit over time. In the process, they can help identify and tackle truly hard problems when others cannot. Among the hard problems nonprofits can help address is the need to get our country on a financially sustainable course. Nonprofits have already contributed by sounding the alarm, providing analysis and offering policy options.

The deficit dilemma has helped to highlight the hurdles political and business decision-makers face when it comes to calling for sacrifice. Elected officials must respond to caricatures of their views repeated in 24 hour news-cycles. Business leaders are required to produce shareholder value as measured in quarterly returns. The nonprofit sector may be the only one that can afford to ask tough questions, test novel solutions and build consensus from the ground up.

In considering our tax laws in 2012 our goals should be straight-forward: to regain our ability to solve problems as a nation. Preserving the nonprofit sector’s freedom to help tackle society’s next hard problem is an essential first step.

—Jane Wales

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Over the past few days, the New York Times has offered a telling glimpse into the varied nature of the nonprofit sector and the ways in which it touches our lives—from day-to-day services to high policy. The Times coverage also offers insight into our shared instinct to preserve a sector that has the agility to help address market or policy failures.

Saturday’s paper reminded us that America’s increasing numbers of unemployed rely upon nonprofit food banks and other charitable services when their government benefits are exhausted. Another article reports on one of the most significant developments in nuclear non-proliferation policy—the establishment of a global nuclear fuel bank—enabled by a $50-million gift from philanthropist Warren Buffet to the UN’s resource-strapped and politically hampered International Atomic Energy Agency. The bank would provide low-enriched uranium to states seeking nuclear power, in exchange for their returning the spent fuel and foregoing the indigenous capacity to produce their own fuel, including that which is weapons grade. Thus, the nuclear fuel bank would control the cycle of nuclear production and its associated dangers.

It is against this backdrop that a debate erupted within the nonprofit sector over proposals to alter the tax treatment of the donations on which it relies. The Times covered that as well, treating it as more than an industry’s special pleading. The debate’s starting point is that deficit reduction will require the combination of reduced spending and increased revenues. The question is whether tax breaks for charitable gifts are off limits or on.

A range of organizations from think tanks, advocacy and service groups to churches, temples, universities and hospitals have long benefited from the tax write-off their benefactors enjoy. And, in the past decade there has been an explosion in the creation of new foundations, tax exempt endowments established to advance social causes. The introduction of these new philanthropic players with bold ambitions has created benefits not only for our society but also for others across the globe.

Our tax code reflects the importance we place on the freedom that these philanthropies and other nonprofits enjoy. Reducing charitable deductions could adversely impact a nonprofit’s ability to raise or grant the funds needed to fulfill its mission. The change would occur on the heels of a recession that has already reduced foundation endowments and individual givers’ accounts, forcing their grantees to make do with less. Moreover, as national, state and local coffers have shrunk, nonprofits have stretched to make up for the resulting reductions in government services, providing a safety net for America’s most vulnerable families.

But the impact on nonprofits of a changed tax treatment is likely to be as varied as the non-profits themselves—not to mention the philanthropists that support them. Donors are motivated by a range of factors. Tax relief is among them, but how much is not known. In order to judge whether it is right or wise to ask this sector to sacrifice further, policymakers would need to know the risks and benefits to society as a whole.

While that analysis is undertaken, it would be useful to come to a shared view of the reasons for the favorable tax treatment in the first place. Americans value the sector because it is unconstrained by the need to win elections or generate profits and can therefore take actions and generate ideas that may be unwelcome, unpopular and unprofitable today but produce true societal benefit tomorrow. In the process, they can help identify and tackle truly hard problems.

Among the hard problems the sector can help us address is the need to get our country on a sustainable course.

The sector has already contributed by sounding the alarm and offering specific options for financing the obligations we undertake as a country over time. The continued search for solutions will not only test our willingness as a citizenry to share in the sacrifice, but also our ability to think strategically, ask and answer knotty questions, explore novel solutions—and to imagine. These are the strengths of the nonprofit sector.

While the sector can and will continue to contribute in these ways, informing a larger process, it may also choose to shoulder a greater sacrifice. Whatever choices the sector and we make, let’s never sacrifice the sector’s independence from political and market constraints.

We must and they should preserve the sector’s freedom to help us solve society’s next hard problem.

—Jane Wales

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The World Affairs Council was honored to host the President of Kosovo, Dr. Fatmir Sejdiu, on January 12. As the leader of the world’s youngest country, Dr. Sejdiu is optimistic about Kosovo’s future, but also recognizes the many challenges it faces. Regionally, Kosovo is challenged by Serbia’s continued refusal to acknowledge the state’s independence. Globally, Kosovo has only been recognized by 65 of the 192 sovereign UN member states, including the United States and 22 of the 27 European Union member states; notably absent from this group are Spain, Russia and China. As Kosovo’s second anniversary approaches, the president ended on a positive note: “We can’t forget, but we can move forward!”

To listen to the entire program with President Sejdiu, please visit our online archive. To read about the latest country to recognize Kosovo’s independence, Mauritania, click here, and to learn more about the Serbian position, read the recent New York Times interview with Serbia’s Minister of Foreign Affairs.

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Acknowledging the diverse feelings Americans have about the United Nations, Dr. Esther Brimmer, Assistant Secretary of State for International Organizations, spoke to a large audience about the many ways the UN and the United States interact. Brimmer used examples relevant to California, such as aviation and shipping, intellectual property rights, and communications, to illustrate the support given to the UN by the US and the protection and oversight of US interests by various UN agencies. Brimmer also discussed President Obama’s call for an “Era of Engagement,” which is already bringing about changes in nuclear nonproliferation policy, climate change negotiations, and food security initiatives. While responding to audience questions, Brimmer devoted time to explaining the Obama administration’s decision to rejoin the UN Human Rights Council as well as the continued concerns about HRC members’ compliance with the organization’s mission. Brimmer was optimistic throughout the program and ended by expressing her joy at seeing the Islamic world’s positive reception of Obama’s June speech in Cairo.

To listen to the entire program, please visit our audio archive. Learn more about the United States’ involvement with the UNHRC here. Finally, you can watch a clip of the program below.

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