The Jan. 1 fiscal cliff deal, which modified the federal tax code and postponed earlier rulings on discretionary spending cuts, will likely have no long-term effect on charitable giving but could impact the amount of grant money awarded to the College, according to professors and representatives of the College's Advancement division.
The fiscal cliff refers to looming tax increases and across-the-board government spending cuts that were to take effect on Jan. 1 if a deal had not been reached. A last-minute deal allowed the Bush-era tax cuts to expire for the top 2 percent of Americans and postponed the automatic spending cuts until March of this year.
Large donations are usually unaffected by small changes to the tax code, according to economics professor Andrew Samwick, who specializes in domestic financial policy.
More likely, if long political showdowns continue to occur before bills can be passed, investor confidence will be hurt, which may then cause donations to decrease, Samwick said.
"The increases in tax rates on the highest incomes may make new charitable donations more tax advantaged," he said in an e-mail to The Dartmouth.
Ann Root Keith, interim senior vice president for advancement, said it is difficult to speculate how philanthropy at Dartmouth might be affected by recent changes in tax codes.
"Typically, we are more worried about the general state of the economy, as that has a greater impact on a donor's willingness to make philanthropic gifts," she said.
Ron Shaiko, associate director of the Rockefeller Center, said that he predicts tax increases on high-income Americans may force the College to reassess its strategy to solicit giving.
"It will have a bit of an impact in the short run," Shaiko said. "We will have to change our strategy of how we discuss giving with the big dollar donors."
The fiscal cliff deal also reduced itemized deductions including those for charitable donations for single Americans earning over $250,000 and couples earning over $300,000 by three cents for every dollar they earn over the thresholds. This phase-out of deductions provides an increased incentive to give to charity in the short term, Syracuse University professor of public affairs Len Burman said in an e-mail to The Dartmouth.
It is unlikely that Congress will take further actions that will discourage charitable giving because of pressure from the non-profit sector, Shaiko said.
Although the effect of new tax policies on donations to the College has yet to be determined, Dartmouth will be impacted by the sequestration of non-defense discretionary spending, according to Samwick.
While Dartmouth does not compete for federal grants to the same degree as its peer Ivy League institutions, the College still relies significantly on them, according to Shaiko. Cuts to federal contracts would hurt the College, especially the Thayer School of Engineering and the "hard sciences," which rely on such funding to keep their labs open. Due to the potential effects of funding cuts, the National Association of Independent Colleges and Universities of which Dartmouth is a member will lobby to extend federal funding, he said.
In the 2012 fiscal year, the Dartmouth College Fund raised $46,951,614, according to associate director of programs and analysis Kim Hoyt. Six donations amounted to one million dollars or more, the largest type of donation category the Fund recognizes.
