One of the ways used to determine how well the economy is going is by looking at charitable giving. A lot of Americans feel quite charitable and give regularly. Maybe they tithe to their church or help support a soup kitchen or any of the thousands of charities out there. It appears as if 2018 saw a massive drop in such giving to charities.
In fact, this was the largest drop in charitable giving since the 2008-2009 Great Recession. Part of the slip in giving is due to the tax policy changes that happened that year. It was a 1.1% drop from 2017. While that might not seem like a lot of money, it totals out somewhere around $3 billion less than 2017. This is according to data from The Giving USA report.
It was an interesting year. The new tax cuts were put in place, but hardly anyone noticed until it was tax time. The economy was strong and wages have started to rise, but the stock market was volatile. While individuals didn’t feel it was a good time to give, big corporations, who received the largest part of this tax cut, actually improved their giving by 0.7%.
Reason for the Drop
Experts say the reason why charitable giving fell in 2018 is the new tax change. It doubled the standard deduction. 45 million households in 2016 itemized their deductions, but because the new tax law already doubled it, they didn’t feel the need to donate money to increase it themselves. It ultimately lowered the incentive often given for charitable giving.
“Whenever there’s a major tax policy change like that, it has an effect.” said Rick Dunham, chair of Giving USA Foundation, which publishes the annual report. It is researched and written by the Indiana University Lilly Family School of Philanthropy.
Stacy Palmer, editor of the Chronicle of Philanthropy, a magazine that covers the nonprofit world, said, “The changes would have relatively less impact on charities that rely on wealthy donors, and greater impact on social-service providers and other charities that get broad support from middle-class Americans. Charities who depend on them are really worried,” said Palmer.
Impact on Charities
While charitable giving is down overall, the full impact of this loss won’t be realized until later this year. Groups like United Way don’t release their financial year numbers until later. But it’s known that about 90% of the money they receive is from workplace campaigns. They’re already starting to see challenges, including competition from websites like GoFundMe.
Religious giving is also down. A lot of that has to do with the controversy surrounding the Catholic church and the lower number of people who identify themselves as religious. But it’s not just religion, as overall giving for educational foundations and society benefits are also down, revealing a larger overall problem.
At the same time, giving was up for some sectors. It was found that environmental and animal-welfare type nonprofits did see an increase in donations. Even some international affairs saw an increase, but overall nonprofits saw the largest increase. We’ll find out more information about how the tax law impacted charities later this year.
