According to research by the Tax Policy Center, charitable giving could be reduced by $13 BILLION with the passing of the House and Senate tax reform bills. The recently passed bills would increase the standard deduction that taxpayers can get if they don’t itemize. Currently, Americans who are philanthropic are able to benefit from a tax break if they itemize their deductions; by doubling the standard deduction, Congress has removed the incentive for middle-class individuals to support their charities. A decrease in philanthropic revenue is going to seriously compromise the work that these nonprofits are doing in our local communities, and would have a negative impact on our economy.
To put this into perspective, currently there are approximately 30 million people who itemize their tax deductions. With the doubling of the standard tax deduction, many of these individuals would be less likely to donate, because giving at their current level with itemizing means that they would be taxed at a higher level than if they chose the standard deduction. Per the Indiana School of Philanthropy, 82 percent of all charitable giving comes from individuals who itemize their tax return. The changes from the tax bills would take real money away from nonprofits who are making a positive impact on society, nonprofits that are helping in early childhood development, education, healthcare, and social services, as well as the environment, arts, religion, and culture. Our nonprofits are helping individuals and the greater society when the government is unable to do so. If charitable giving declines (and it would decline under these tax bills), the number of people that nonprofits can help would also decrease.
So what does this mean for the nonprofit sector? Well, I recommend that nonprofits invest more of their resources in identifying, cultivating, and stewarding major gift donors. The number of donors who normally give at lower levels will inevitably decline. Major gift programs are shown to bring in more philanthropic revenue for nonprofits; however, developing major gift programs is time intensive, and smaller nonprofits normally do not have the staff resources to invest in these programs. These small shops are handling all aspects of the development cycle, and usually juggling much more (volunteers, marketing, and communication). However, that is going to have to change if these organizations are going to survive. After the 2017 calendar year-end push for donations, all nonprofits, especially the smaller ones, will need to re-evaluate their development plans and shift the majority of their focus to major gift fundraising. This means that other development strategies will have to decrease or even be eliminated.
In the meantime, you can help support the nonprofit sector by continuing to support your charities of choice and by contributing to the Association of Fundraising Professionals’ Political Action Committee. AFP PAC is a strong voice for the charitable sector. Remember, our society needs our nonprofits, and we need to remind our elected officials that we support them. Don’t let charitable giving decrease – let your elected officials know that the newly passed tax law needs to change so that our communities don’t suffer.
How the Tax Rewrite Could Impact Charitable Giving (2017, December 3). Retrieved from https://www.npr.org/2017/12/03/568206410/how-the-tax-rewrite-could-impact-charitable-giving
Statement of the Charitable Giving Coalition on GOP Tax Reform Framework (2017, September 29). Retrieved from http://www.afpnet.org/Audiences/MemberNewsDetail.cfm?ItemNumber=46281