I don’t know about you, but I have spent the majority of my adulthood unaware of the broad power wielded by the President of the United States. Growing up, “I’m Just A Bill” from Schoolhouse Rock led me to believe the President had an important, but limited role, to sign or veto bills passed by Congress. Of course, I’ve always known the President is the Commander-In-Chief and has the ability to launch nuclear weapons, but there is nothing in the Schoolhouse Rock song about executive orders or Presidential appointments or anything about the operations of the Executive Branch. As it turns out, the President has quite a bit of authority. When a new President takes office, particularly when replacing a President of the opposite party with very different views on the role of government, swift and significant changes occur, even without additional action by Congress. So how might this leadership change in Washington impact philanthropy?
First, the President apparently has broad latitude with regard to the interpretation and enforcement of laws enacted by Congress. For example, in my office I have a copy of the US Tax Code which is two bound volumes containing the language of the tax law passed by Congress. I also have a set of the Income Tax Regulations, which is a six-volume set of books containing the US Treasury’s interpretation of the tax laws. Laws passed by the legislative branch (Congress) are subject to extensive, expanded and detailed interpretation by the Executive Branch (President and Treasury). The President does not get to make law, but has significant authority to interpret and enforce them at various degrees of fervor. With regard to charitable giving, this executive latitude is demonstrated through the power of the purse.
According to the US Debt Clock the federal government collects approximately $5 trillion in taxes and spends approximately $7.1 trillion on federal programs, leading to an annual deficit of approximately $2 trillion. The new administration is likely to lean heavily on spending cuts rather than raising taxes to reduce the deficit. Donors should stay alert to the need to provide quick support if the spending reductions affect resources allocated to your favorite charities. It requires precision to cut wasteful or unnecessary spending without reducing important social safety net programs for the most vulnerable among us. It is guaranteed that not everyone will be happy with the coming actions of the executive branch. As a donor, you may need to increase your private support for important programs that the federal government either cannot or will not be able to continue to support at current levels. Some of these changes may happen swiftly because they are controlled entirely by the executive branch.
Second, as a result of the 2024 elections both the House and the Senate are now controlled by the same party occupying the White House. This means Congress can move more quickly to pass laws that further solidify their view of the role of government in society and the economy. In the charitable world, all eyes are on the reconciliation bill which holds the possibility to reduce or increase incentives for charitable giving. For example, the higher standard deduction passed with the Tax Cuts and Jobs Act of 2017, effectively removed the incentive for charitable giving for all but the wealthiest nearly 10% of tax payers. That law, passed by a Republican Congress and administration, is set to expire at the end of 2025, so the new Congress and administration will likely want to see it extended or modified. Bringing back a greater incentive for charitable giving can be one way to try to offset potential reductions in federal funding for nonprofit programs and services.
With new leadership in Washington, donors should stay alert to funding needs at your favorite nonprofits which may purposefully or inadvertently be caused by changes in federal programs and spending. In addition, donors should consider advocating for support of programs and legislative changes that provide necessary social safety nets and encourage charitable giving from more people. Staying alert to the positive and negative impact of leadership changes in Washington on charitable giving could be your next best opportunity to Give Well.
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