Charities Blame Changes in Tax Law for 'Giving Gap'

Charities Blame Changes in Tax Law for 'Giving Gap'

Although a strong economy tends to boost giving by individuals to charities, many nonprofits are facing a "giving gap" as a result of tax law changes that keep mid-level donors from itemizing charitable deductions, CNBC reports.

Despite fairly strong economic growth over the last three years, giving by individuals in the aggregate is down since 2017, when the Tax Cuts and Jobs Act doubled the standard deduction and disincentivized many people from itemizing their returns. Following passage of the law, total giving by individuals fell 1.1 percent on a year-over-year basis in 2018, according to a Giving USA study. And while the U.S. Congress Joint Committee on Taxation predicts that individual giving to causes other than education and health increased in 2019, many small local charities are concerned about what they see as a giving gap, CNBC reports.

"We are seeing a fewer number of smaller and mid-level donations under $500," said Lisa Whetzel, executive director of Britepaths, a human services nonprofit in Fairfax, Virginia, that has seen a drop in individual donations and was facing an $80,000 shortfall at year-end. "I think that the tax change has priced out any benefit to our contributors who are unable to give beyond this level."

Even some large charities have seen declines in individual giving. They include United Way Worldwide, which blames the change in the standard deduction for effectively taxing middle-income donors on their contributions and creating an incentive gap between middle-class and rich donors. "It's not about a small number of wealthy people picking and choosing their favorite charities to give to," said Steve Taylor, United Way's senior vice president and counsel, "it's really about Americans across the country from all income and different types of backgrounds all giving back to their communities and helping people in need, that's what charity is about in America."

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Kayla Tausche, Stephanie Dhue. "Charities Complain About 'Giving Gap' Since GOP Tax Law Took Effect." CNBC 12/31/2019.