Election Done, Focus Is On Budget Cuts, Tax Deduction

President Barack Obama won re-election to a second, four-year term last night but he likely won’t have too much time to bask in the glory, as critical issues that impact the nonprofit sector will need to be dealt with before his inauguration in 10 weeks – if not sooner.

The primary issues – namely the federal government’s financial difficulties, often termed the “fiscal cliff” – were determined long before the election, according to Tim Delaney, president and CEO of the National Council of Nonprofits in Washington, D.C.

With the election settled, the first thing out of people’s mouths seems to be “fiscal cliff.” At the end of 2012, Bush-era and Obama stimulus tax cuts are set to expire, followed by sequestration setting off automatic spending cuts in January — unless Congress and the president take action. There are fears that the “fiscal cliff” – tax increases coupled with spending cuts – could send the nation back into a recession. The president will face the same makeup in the legislative branch, with majorities remaining in the U.S. Senate (for Democrats) and House of Representatives (for Republicans).

Automatic cuts via sequestration were set in motion last year when the Joint Congressional Committee on Deficit Reduction failed to reach agreement on deficit cuts. Automatic cuts of $1.2 trillion over 10 years are set to begin Jan. 2, 2013 unless Congress acts, with $55 billion automatically sliced from domestic programs and $55 billion from defense spending. Much of the domestic spending will affect programs such as education, disaster relief, low-income housing and programs like Meals On Wheels.

Sequestration cuts and limiting the charitable deduction are the two main concerns for United Way Worldwide – though neither has necessarily been impacted by the election results – according to Steve Taylor, senior vice president of public policy. The Alexandria, Va.-headquartered organization doesn’t directly benefit but many of its partners receive funding from the human service programs slated to be cut in sequestration.

“The fiscal pressures that created the need for sequestration in the first place, and the expiration of cuts at the end of the year, create this need for additional revenue,” Taylor said. Both presidential candidates had looked at the itemized deductions as a source of revenue in their platforms. “Our expectation is that the deduction will be on the table in whatever negotiation is going on as they look at sources of revenue,” he said.

The charitable deduction has been on the table in each federal budget proposed by the president in his first term. He has suggested reducing the federal deductibility of donations to charity for citizens in the highest income tax brackets. Republican candidate Mitt Romney also had proposed limiting a variety of deductions, including the charitable deduction.

“It’s going to become a question of timing: will they try to deal with it during the lame duck session, when some departing members might feel more at liberty to do what’s right for the country rather than what’s good for the party during elections — whichever party — or whether they’ll punt and kick the can down the road yet one more time into next year, requiring actions of leaders of both parties to come together to do what’s best for the country,” Delaney said.

Other issues relevant to nonprofits also remain the same, namely protecting charitable giving incentives and continuing work to reform antiquated government contracting system, according to Delaney. “The overall issue is the state of the economy and how nonprofits are being asked to do so much more, for so much less and for so much longer,” he said.

At the state level, Maine and Maryland voters approved ballot initiatives for same-sex marriage while in Colorado and Washington voters approved legalizing recreational use of marijuana. Unofficial results of same-sex marriage ballot initiatives were still unclear in Minnesota and Washington at presstime.

Within 12 hours of the race being called for Obama, many, including the candidates, emphasized the need for elected officials to get back to governing after the campaign and work across the aisle to find common ground on vital issues.

“The top issue facing our nation the day after the election is the same as it was the day before the election – the economy,” said Matthew Shay, president and CEO of the National Retail Federation (NRF), the world’s largest retail trade association. “The U.S. needs public policy that encourages economic growth and removes barriers to job creation,” he said.

“Issues affecting the retail industry are the same critical issues facing policymakers in Washington,” said Shay, pointing out the following priorities for retailers:

  • Health care reform that actually reduces costs instead of imposing mandates;
  • Tax reform that makes U.S. businesses more competitive;
  • Sales tax fairness that puts Main Street and online retailers on a level playing field;
  • Neutral labor policy that doesn’t favor either employers or unions over the other;
  • Credit and debit card swipe fees based on transparency and competition rather than monopolies; and,
  • Removal of trade barriers that drive up consumer prices.

“Those are just a few of the initiatives that can help retailers create jobs, contribute to the nation’s economy and provide American families with the products they need at prices they can afford,” Shay said.

Andrew Steer, president of the World Resources Institute (WRI), called on the president to fulfill a campaign promise of taking climate change seriously.

“In its first term, the Obama administration made real progress to reduce harmful emissions and shift the country toward cleaner energy. The administration implemented historic clean vehicle rules, proposed standards for greenhouse gas emissions for new power plants, and directed unprecedented investments in clean energy, among other achievements,” said Steer, but added that wasn’t enough. “The Obama Administration has not yet put the country on a pathway to truly confront the climate crisis,” he said, emphasizing a strong national climate and energy strategy and working with congress national-level policies, such as putting a price on carbon to get the nation on a “low-carbon trajectory.”

He called on the president to reject proposals “that would over-exploit” America’s resources and increase dependence on high-carbon fuels.

Super storm Sandy “delivered a crippling blow, reminding us what climate change looks like. Climate change is here and its impacts are being felt today. In its aftermath, we have seen how people can come together in times of need, set aside their differences, and focus on the big picture. We need to learn from these lessons and turn them into action,” said Steer. “President Obama’s legacy will be shaped by his ability to take on big challenges, including climate change, clean energy, environmental protection, and sustainability.”