Trump tax reform didn't spark philanthropic apocalypse as predicted
Around this time last year, anxieties were running high at charities around the country. Recent changes to the tax code, particularly the doubling of the standard deduction, led charitable leaders to worry that fewer taxpayers itemizing would imperil giving in the world’s wealthiest and most generous nation.
The American Enterprise Institute predicted that charitable donations would plummet by $17 billion, or about 4 percent. The Urban-Brookings Tax Policy Center pegged the figure higher at 5 percent. Instead, the opposite happened.
Overall charitable giving in the United States actually increased last year by 1.5 percent, according the new data published by Blackbaud. Large non-profit organizations saw giving increase by 2.3 percent, while medium-sized organizations saw donations grow by 2.0 percent.
The philanthropic spirit of America lives on
In sum, Americans willingly parted with an unprecedented $410 billion in savings to support good causes in their neighborhoods, and around the planet. And that figure fails to account for the hours spent volunteering or the dollars quietly given to friends in need.
There were reasons to be suspect of the dire warnings of charitable collapse. “Tax deductions aren’t why people donate to charity,” I wrote in a Fox opinion column last April. One-third of households itemized under the previous tax regime, but a full two-thirds of Americans give to charity. That highlights a broad swath of the population who give for reasons beyond tax savings.
People give because they see a way to make positive change in society with their dollars. They give because they believe in a cause. People have personal connections to the organizations they support, even a personal stake in the hopeful outcome, such as supporting cancer research.
Small, local charities less rosy
Notably, the picture is less rosy when it comes to donations from further down the income scale. Small-dollar donations disproportionately support churches, schools and the local organizations that enrich communities. Last year, these organizations saw a decrease in giving of 2.3 percent.
This is a trend worth monitoring because society is stronger when we have a broad base of charitable givers. Small, local charities form the backbone of our civil society. We’re better off when everyone has a stake in their success.
Furthermore, if the local food kitchen or job training program can’t keep the lights on, it creates a void that some will demand be filled by government. Everyone has an interest in finding solutions to public problems, and charitable giving is a vote for local communities rather than distant bureaucrats.
Some people suggest going even further, and discussions of a universal charitable deduction have gained currency in the wake of tax reform. That would extend tax-advantaged giving to the increasing number of Americans choosing the standard deduction.
Tax reform: a win for American philanthropy
On net, tax reform was a win for American philanthropy, particularly to the extent it spurred continued growth in the economy, which enables more generosity. Bigger donors certainly saw the benefit, resulting in positive growth for the charitable sector. Still, we need to make sure we haven't harmed lower-dollar giving, because losing these modest donors ultimately feeds bigger government.
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I recently heard FreedomWorks’ John Tamny say that the growth of the state reduces power for average people. That’s true, and increased citizen engagement in the form of charitable giving captures that power back. Let’s make sure private giving crowds out government in the non-profit sector, not the other way around.
Peter Lipsett is vice president at DonorsTrust, a donor-advised fund that granted more than $140 million in 2018.