Wednesday, May 22, 2024

News and Ideas Worth Sharing

HomeBusinessPerspectivesBiden or Trump...

Biden or Trump and the Nonprofit Sector – Part 1, The Arts

The U.S. president has many ways to affect the vitality of the arts and culture community in this country. How would the effect of either of our two candidates, Trump and Biden, be felt in this part of our nonprofit sector?

|

The 2024 presidential election is the most covered story ever, dominating the media and the public square. The election’s impact on the economy, the U.S.’s standing worldwide, women’s rights, and liberal ideas have received significant attention. Yet, more needs to be written about what effect the presidential election may have on the nonprofit sector. The sector includes arts and culture, education, health care, international relief, and others. According to the most recent available data, the industry accounts for almost 7 percent of the jobs in the country and 5.6 percent of GDP and contributed $1.4 trillion to the economy in 2022. The results of the next election will profoundly impact the nonprofit sector.

The last few elections have been very close, so predicting the winner, while fun, is less valuable than predicting what may happen to the sector in each scenario. I will examine the arts and culture sector in part 1 and the social, environmental, and other NGO groups in part 2 (in the next installment).

In the naïve days of the culture wars (the 1980s and ’90s), the simple question regarding the presidential election centered around the National Endowment for the Arts (NEA); a Republican president would threaten to cut the NEA appropriation because the government “should not be in the business of funding culture,” particularly works deemed “pornographic” or “sacrilegious” (Mapplethorpe’s homoerotic photographs or Andre Serrano’s “Piss Christ”). Ironically, while the NEA’s censorship was much publicized and protested, the amount of NEA grants as a percentage of the total federal budget was less than a rounding error (0.021 percent). In 1991, the dancer-choreographer Eliot Feld spoke before Congress, stating that if only the government would ‘reduce the length of a nuclear submarine by 10 feet, the savings alone would more than fund the arts in America.’

Ronald Reagan (a Republican who ran on decreasing government spending) cut NEA funding by about 10 percent (to $146 million) in 1981. Since then, while the funding level has not kept up with inflation, no meaningful correlation exists between the increases or decreases in NEA funding and the president’s party affiliation.

We have some indications of how the arts and culture will fare under each president because, for the first time, we have two candidates who have already been president. President Trump proposed eliminating the NEA during his term, but Congress preserved the funding, and President Biden has increased the NEA budget slightly. However, the NEA funding is almost irrelevant because it is small and insignificant. Although the threat of eliminating NEA funding (a possibility under another Trump administration) would suck up the time and energy of arts organizations in protest, the profound effects will come from each president’s other policies.

Arts organizations receive most of their unearned income (donated) through contributions, and the federal administration’s actions significantly impact the arts and culture in America through tax laws. Arts organizations traditionally receive between 70 percent and 80 percent of their contributions through individual gifts—high dollar commitments to endowments or building campaigns (think, David Geffen and Philharmonic Hall). Tax deductions for individual donations are likely to continue (and no administration has ever tried to reverse this); however, the most recent Trump Tax Cuts and Jobs Act (TCJA) in 2017 adversely affected individual giving. For example, because of the new tax act, approximately 90 percent of individuals file standard deductions (where there is no tax benefit to listing charitable contributions). In contrast, the percentage was approximately 70 percent before the new Trump tax act. In other words, 20 percent fewer taxpayers were rewarded (or at least incentivized) by the tax law to reduce their taxes by contributing to nonprofit organizations. The wealthier donors will continue to contribute, but the many small donors will likely continue to file standard deductions under Trump. While the precise effect is unknown, Indiana University’s Lilly Family School of Philanthropy estimated that $13 billion to $20 billion of donations would be lost to charities.

The more substantial but less obvious impact of the TCJA is the inheritance tax deduction, which more than doubled for a married couple to over $24 million. That means that after the death of a wealthy couple, the first $24 million of inheritance is protected from estate taxes, whereas, in the past, that amount was under $11 million. In the past, the beneficiaries of wealthy families would need to sell valuable art and collectibles and land or real estate to pay the estate taxes, encouraging them to donate works of art or property to nonprofit organizations. According to the Tax Policy Center, the year before the TCJA, overall charitable bequests totaled $30.36 billion, with an estimated drop to $4 billion following the following year.

There is no more explicit example of the effect tax laws can have on the arts than the 1986 Tax Act, which created an alternative minimum tax and immediately reduced the amount of donations of works of art to museums by 50 percent. In 1991, that restriction was lifted for one year only, and that year only saw a 400 percent increase in contributions of works of art.

Finally, some corporations have enjoyed significant tax deductions because of the TJCA, and those will likely remain in place during a Trump administration, with corporate tax rates returning to pre-Trump days if Biden is reelected. In 2018, corporate giving through corporate foundations, direct giving, and sponsors accounted for $5.7 billion, which dropped by half due to the pandemic in 2020. More recent data are not available, and therefore, the effect of the presidential election on corporate giving to the arts has yet to be discovered.

If Trump is reelected, many of the TJCA components (higher limits on estates, lower tax rates) scheduled for elimination will be continued, and we speculate that they will remain in place or even tilt further away from helping the sector. Biden has already stated his preference for allowing those components to expire.  Furthermore, through its PPP program and the Save Our Stages Act, the Biden administration saved the arts ecosystem in America. More recently, legislation has been proposed to save the faltering live nonprofit theaters in America. While we can never expect any administration to support the arts like they are supported in Europe, the Biden administration directed the federal government’s power to revitalize the arts in America for the first time since the WPA.

Financial stability is undoubtedly a significant contributor to the health of the arts sector, and a president’s approach and philosophy to taxes are measurable. However, the next president’s much more important, almost existential, effect on the arts affects the freedom of ideas and creativity, allowing the arts to express new ideas and lead the country to a new level of democracy.

I’ve written that arts organizations are liberal organizations, not in the political sense but in the sense that they are open to ideas, pursuers of truth, and operate on the principle that we all “own” them. Suppose the states that are now engaged in banning books and suing arts organizations over pseudo-Christian morality are the states that most help elect Trump. In that case, we can only imagine the damage the next Trump administration may have on the sector.

The State of Florida sued an arts organization in Orlando for presenting “A Drag Queen Christmas” live performance. We know from Trump’s election committee and from his own words that his new administration will nationalize some of the “Christian values” and impose a moral chilling effect on the arts. Moreover, we will likely not realize the extent of the impact because some art organizations will self-censor. We experienced this during the culture wars of the ’80s and ’90s, where some organizations self-censored their programming and exhibitions out of fear of losing funding or even the threat of jail time.

As our differences over sexual orientation, race, and religion have intensified, we can only imagine the negative effect a Trump administration will have on the artists, boards, arts leaders, and rank and file of our arts organizations. Just as a generation of American Black artists emigrated to France in the 1920s because they were unwelcomed, and a generation of Jewish artists left Germany in the 1930s, we may find the very core of American creativity departing the U.S. during the next Trump administration.

spot_img

The Edge Is Free To Read.

But Not To Produce.

Continue reading

BUSINESS PERSPECTIVES: BerkShares Business of the Month is Brava

With an abundance of highly regarded food and drink establishments in the Berkshires, it can be hard to stand out. Whitney Asher, Owner and Manager of Brava in Lenox, has made it his business to do so. With a tasteful...

BUSINESS PERSPECTIVES: Stockbridge storefront beats again with Whispered the Heart

The unique shop offers special wares and crafts made in the Berkshires.

Jalisco Cantina Mexican restaurant opens in former Prado’s Café site on Lee’s Main Street

The eatery serves breakfast for now, with plans to add lunch and dinner.

The Edge Is Free To Read.

But Not To Produce.