Will New Tax Laws Change Our Personal Giving?

personal giving

In the early 1980s, as a very young nonprofit executive director, I experienced the impact of political change, or rather the impact of the predictions of change. On Jan. 20, 1981, President Reagan was inaugurated.

Tax reform winds were blowing strong. By 1986, the tax-reform act passed Congress. During President Reagan’s two terms of office, philanthropy changed in many ways, learning to rely less on governmental funding and becoming more competitive. In short, our president expected philanthropy to step into the void and make up the difference.

Seasoned nonprofit executives were nervous, predicting the end of social services as we knew them. I didn’t get it. I didn’t understand why they were afraid; I didn’t understand what the experts were predicting.

Change happened. Twenty years later, philanthropy was stronger than ever. Nonprofit organizations were springing up in towns large and small. Fundraising became an industry, establishing best practices.

In this community, philanthropy continued to grow. Tax reform didn’t create less giving.

Now, 36 years later, the sound of change can be heard again, as rough waves crash onto shifting sands in Washington.

Here we are again with a new president, and speeches during the campaign suggesting serious tax reform. And again, the nonprofit community has become nervous about the impact it might have on its fundraising. Warnings abound in articles, blogs and tweets.

President Trump proposed changes in the tax structure, which include capping deductions for charitable giving. If Congress is, as Thomas Friedman describes it, “the sum of all lobbies,” then those changes will be bottom of the list.

Should it matter to donors?

There will be tax changes that impact some donor decisions about charitable giving. Tax change will impact some nonprofit organizations.

Every four to eight years, change comes to Washington. New directions are set. If it changes the governmental funding available, nonprofits will look for different funding sources or make changes in services to fit new funding requirements.

The shifting sands become a beachhead where nonprofits take a stand to fund vital services. They will need local philanthropy now just as before.

The hope for every nonprofit is that donors continue to support their work. Tax changes will likely have the most impact on mega-donors, who represent only a tiny percentage of total givers. While their giving is outsized compared to the rest of us, we have the greatest ability for impact in the sheer number of givers.

In a report from the Institute for Policy Studies and Inequality, “Gilded Giving: Top-Heavy Philanthropy,” “charities are becoming dependent on larger and larger donations from smaller numbers of high-income, high-wealth donors, and private foundations.” They also tell us giving from low- and middle-income donors is declining.

The middle-income donor is you and me – donors who write checks to favorite charities for $50, $100, $250 every year.

Such reports are based on analysis of itemized deductions for charitable giving on income tax returns. The good news is most donors make charitable donations and never take a single deduction.

We drop change in special collection jars in convenience stores for someone who has an immediate need for an operation, or funeral expenses for a life unexpectedly cut short. We chip in. We don’t write it off on our taxes.

The tax write-off for giving is 100 years old. America will be 241 years old this year. From our beginning, we’ve given to take care of our neighbors with money and time.

America was named the most generous country in the world in 2016, along with New Zealand and Canada, according to a report by the Charities Aid Foundation. The Financial Times cites research that how much people give does not matter whether their country has high or low tax rates.

In this country, like freedom, giving is personal. We give to help the poor, to change education, improve medicine, to enjoy the arts. We support causes we believe in and invite others to join us.

For most of us, tax change makes no difference. The causes we care about will continue to need our giving. If you’re a mega-donor stay close to your financial advisors. We can all give well despite change.

Dawn Franks, CEO of Your Philanthropy offers advising services to families, businesses and foundations to enhance the giving experience and maximize impact. She writes a blog, the YP Journal, at www.your-philanthropy.com . Comments and questions are welcome. Send to info@your-philanthropy.com.

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