The Tax Cuts and Jobs Act (TCJA), which was signed into law by President Donald Trump in 2017, could reduce charitable giving by $19.1 billion per year through 2025, a study commissioned by Independent Sector finds.
To gain a better understanding of the potential impact of a range of policy proposals that extend charitable giving incentives to non-itemizers, IS commissioned the Lilly Family School of Philanthropy at IUPUI, in partnership with the Wharton School of Business at the University of Pennsylvania, to conduct the research. Specifically, the study analyzed the estimated impact of five policy proposals that incentivize charitable giving among non-itemizers: a deduction identical to itemizers' tax incentive; a deduction with a cap in which gifts of more than $4,000 ($8,000 for married couples filing jointly) do not receive an incentive; a deduction with a modified 1 percent floor in which donors can deduct half the value of their gift if it is below 1 percent of their income and the full amount of the donation above 1 percent; a non-refundable 25 percent tax credit; and an enhanced deduction that provides additional incentives for low- and middle-income tax payers.
According to the study, Charitable Giving and Tax Incentives: Estimating changes in charitable dollars and number of donors resulting from five policy proposals (40 pages, PDF), estimates of giving for 2018-2025 indicate that up to 2.6 million fewer households might donate each year and charitable giving could be as much as $19.1 billion less than if the 2017 tax code changes had not become law. At the same time, all five proposals could create more donor households, and four of the five proposals could bring in more charitable dollars than are likely to be lost due to the recent changes; the non-itemizer deduction with a $4,000/$8,000 cap was the only proposal that would bring in fewer additional charitable dollars than are likely to be lost as a result of TCJA. And four of the proposals would likely generate more giving than cost to the government (the exception being the non-itemizer charitable deduction).
"In a sector that prides itself on pluralism, it should be expected that consensus about a preferred policy approach is not automatic," Independent Sector president and CEO Dan Cardinali wrote in a note to members. "Beyond the mere diversity of opinion, there also has been a lack of information about how some different policy components will impact donors, nonprofits, our work, and our communities. We have continually heard from nonprofits that more information on these policy options could strengthen advocacy and potentially build momentum behind a common solution to increase charitable giving."