December 18th, 2017 – Today is Monday, December 18, 2017 and it looks like the new tax plan will become law. There is a lot we don’t know, as the bill was publicly released just last Friday, and is extremely long and complex. The general outlines, however, are pretty clear and much analysis is being produced as we speak. My thoughts here are around whether these changes in our tax system will reduce or increase the need for charitable food support to Vermonters who access it now, and how it may impact donations to organizations like your Vermont Foodbank which supports those Vermonters accessing food assistance.
I’ll start with a prediction: the new tax bill, alone, will not result in a different situation at the end of 2018 for anyone who now has the need for a food shelf or meal site to make ends meet nor will it ensure they get enough nutritious food. The biggest tax burden on people with incomes that leave them eligible for SNAP (formerly food stamps), WIC (the supplemental feeding program for Women, Infants and Children), school meals or Medicaid are payroll taxes. Payroll taxes are not being reduced in this bill. It’s only income taxes that are being changed. And earned benefits like SNAP and WIC that do the most to keep people with low incomes food secure today are likely to be under intense pressure in the near future, which we’ll get to a little later.
Feeding America, our national partner organization with 200 member food banks, laid out 3 principals for this tax bill, that it should: • Prioritize support for those individuals and families most at risk of being food insecure; • Support short- and long-term funding for federal nutrition assistance programs; and • Preserve tax incentives for the contribution of both food and money, and maintains current levels of charitable giving. None of those are met by the bill likely to pass and the interests of people with low incomes don’t appear to have been a priority in writing this legislation.
According to the nonpartisan Tax Policy Center, the new tax bill will result in a household with $30,000 in income saving between $500 – $1000 in the 2018 tax year, depending on marital status and number of children. That’s nice, but doesn’t really change a family’s standard of living in a meaningful way, unless that boost grows over time. However, by 2027 (when many provisions of this bill expire) nearly every family in this category, now assumed to be making $37,000 annually, will be paying a larger percentage of their income in taxes than in 2018, erasing the gain plus more. (http://www.taxpolicycenter.org/publications/effects-tax-cuts-and-jobs-act-representative-families/full)
So the people being served by the Vermont Foodbank are unlikely to see a medium or long-term benefit from this tax change. Also, as I pointed out earlier, these neighbors are also likely to rely on earned benefits like SNAP, WIC and school meals to be able to feed their families. But those very same benefits are on the cut list for some members of Congress.
Inside Congress, Feeding America and other organizations concerned about Americans’ food security have been working for years to stave off cuts to federal nutrition programs like SNAP and school meals. The argument for making cuts has been that the programs are too expensive and the tax revenues can no longer support them. Analysts say this tax bill will add at least $1 trillion to the deficit over the next 10 years, meaning tax revenues will be even lower. And because the benefits for people with low incomes fade over time it’s not foreseeable that the tax changes will reduce the number of families eligible. I anticipate that the drumbeat to reduce spending dramatically will increase. The result? In Vermont, to make up for a 25% reduction on SNAP benefits (call 3 Squares VT here) the Vermont Foodbank would need to double the number of meals we distribute (from 10 million to 20 million). That means twice the food and a dramatic increase in the operational costs of today’s distribution. Can Vermonters donate $7-$10 million in addition to today’s $7 million operating budget?
The analysis done so far is not promising. Tax incentives for charitable giving, like itemizing deductions and the estate tax, will be reduced or eliminated. According to Tim Delaney, President and CEO of the National Council of Nonprofits, the tax bill will be “extremely harmful to Americans and nonprofits.” “Changes to the tax code would drastically reduce charitable giving by as much as $20 billion every year. The bills touted as job creators will put up to 264,000 nonprofit employees out of work. And by reducing revenue by more than a trillion dollars, the bills inevitably will lead to massive spending cuts at all levels of government, growing demand for nonprofit services at the same time that nonprofit budgets are shrinking.”
So what does an organization like the Vermont Foodbank do? While we wait to see how this experiment in tax policy unfolds we keep moving forward, leading the charge to make sure that all Vermonters have enough food to eat every day, that all Vermonters are healthy, and that all Vermonters take action to end hunger and poverty. That means asking you to support the Foodbank now more than ever, and being an extraordinary steward of your gifts to get the most out of each dollar in service of our mission. I’ll likely be asking for your help again as the impact of these tax changes unfolds, either in the halls of the capital in Montpelier or Washington, D.C. We build a foundation for a strong community together. Join me in making the change that allows all Vermonters to reach their full human potential.