In the wake of a 2018 increase in the standard deduction, are taxpayers giving less to charities?
In 2018, the new federal tax policy doubled the standard deduction for individuals to $12,000, likely leading 28.5 million fewer Americans to itemize their deductions, according to projections by the congressional Joint Committee on Taxation. One potential consequence of the Tax Cuts and Jobs Act: reducing charitable giving.
In fact, last year, charitable giving by individual Americans suffered its largest drop since the Great Recession of 2008-09, according to the latest annual Giving USA Foundation report. While there is not yet a demonstrated link between the decrease in giving and the new tax policy, both local and national nonprofits are asking whether the dampening effect could be playing out as anticipated.
“There’s something going on,” says Chuck Gehring, president and CEO of LifeCare Alliance, a not-for-profit organization that provides an array of health and nutrition services throughout Central Ohio.
Following several years of double-digit percent increases in donations, giving to LifeCare was running flat through at least the first half of 2019, Gehring says. Although better positioned than many nonprofits to weather the widespread dip in charitable giving, the organization is looking to address the issue.
“We’re trying to analyze who didn’t give, and we’re calling them just to say, ‘Hey, thanks for your past gifts—we hope you’ll continue to support us for these reasons,’” Gehring says. “We’re going to have to come up with innovative ways to fundraise.”
In its annual report, Giving USA found Americans donated an estimated $427.71 billion to U.S. charities in 2018, down 1.7 percent from the prior year after adjusting for inflation. The report cites the tax policy change and stock market volatility among factors potentially causing the decrease.
In its own recent analysis of giving trends, United Way, the largest traditional charity in the U.S., found that taxpayers who itemize their deductions are twice as likely to donate to charity as those who do not. Moreover, they donate more than twice as much as taxpayers who do not itemize, suggesting fewer taxpayers itemizing would indeed have a dampening effect on giving.
The organization’s local chapter, United Way of Central Ohio, raised $22.5 million to support local poverty-fighting programs in its most recent campaign, a decrease of about $6 million from the previous year, according to a Columbus Dispatch report. United Way’s popular workplace campaign unites employees of an organization with an opportunity to donate and volunteer to causes of their choice.
“We can’t point to the tax law change,” says Lisa Courtice, president and CEO of United Way of Central Ohio. “United Way nationally and worldwide said there could be a correlation ... but I have no evidence to think the typical person in the workplace campaign isn’t doing it because of the tax law change.”
Whether or not the new tax law is hindering giving, United Way, like many not-for-profit organizations, considers the factor one of several new uncertainties, including predictions for a recession. “I think everybody’s concerned,” says LifeCare’s Gehring.