How the GOP tax plan delivers a blow to charitable giving
Charities are concerned that the GOP tax overhaul disincentivizes giving. By doubling the standard deduction, fewer people may end up itemizing deductions, meaning fewer would take the charitable tax break. Judy Woodruff learns more from Stacy Palmer of The Chronicle of Philanthropy about the effects and gets advice from people who want to give.
One of the most significant changes in the tax overhaul is a doubling of the standard deduction. That's what most people can take without itemizing deductible expenses. The final bill increases that maximum standard amount next year to $12,000 for an individual, $24,000 for couples.
Charities are already expressing worry that fewer people will itemize, and, without the tax break, that that will reduce incentives for giving. One estimate found that the number of Americans who itemize could drop from 46 million to fewer than 20 million.
Stacy Palmer is the editor of "The Chronicle of Philanthropy," and she joins me now.
Stacy Palmer, welcome to the NewsHour.
So, remind us, first of all, how does the current tax law operate now when it comes to charitable giving?
Now there's the charitable deduction that we're all very familiar with.
And when you itemize on your tax returns, you get to take that deduction for what you give. So, let's say you want to give $100, and you might get 30 of it back in your taxes because you're at that 30 percent rate.
So it's a good deal. You haven't — out of pocket, you have only spent $70. That encourages a lot of us to give, but it's still available to only to those of us who itemize. If you don't itemize, you don't get the deduction.
Right. And that charitable deduction will still be there in the new tax law.
But something else is going to change, as we mentioned. What is that?
The number of people who itemize is expected to drop really sharply. Part of the simplification of the tax law was to say you don't need to itemize and to raise the standard deduction. Most people won't need to itemize.
But that has a big impact on charities, because many middle-class and upper-middle-class people are ones who aren't going to itemize anymore. They won't have that charitable deduction.
So, the thinking is that they won't think about making the contribution because it won't add to their ability to reduce their tax bill; is that it?
They may think about making a contribution. They may change the amount that they're going to give.
So, certainly, they don't feel that they have that incentive that they now have to give, maybe to give a little bit more generously. So I don't think people think Americans are going to stop giving entirely because of this, but certainly they're going to drop the amount that they will give.
So, you are in charge of a magazine, "The Chronicle of Philanthropy," that looks at this, at charitable giving all the time. How worried are charities about this?
Charities are very worried.
The estimates are that as much as $20 billion might not be given next year because of the change. Now, $20 billion is a lot of money, and it affects a lot of charities. But we're a very generous country, and we give more than $300 billion.
So it's not a giant hit, but it certainly is important, and what charities are worried about most is that it may be an uneven hit. Community charities, local groups, smaller nonprofits, those are the ones that may feel more of the pain. And so most charities are very upset that not every American gets this encouragement to give, that now the very wealthiest are the only ones who get that special incentive to give.
I wanted to ask you about that, because I guess the research shows that people, even people of middle income, now do a lot of giving in this country. I think I read that two-thirds of Americans make charitable contributions.
But one of the things we have seen is a decline in the number of Americans who are giving, and it's mostly those middle-class donors. This is yet just another reason for people to think twice about their charitable gift.
So, what are charities going to try to do in order to head some of this off or to mitigate some of the damage they expect?
We can all expect to get a lot of solicitations, more appeals, more talk about the meaning of your gift, the impact of your donation and why we need you more now than ever.
So, I expect that we're going to get intensified advocacy for charitable giving, so everybody expect your phone to be ringing, your e-mail appeals to keep flowing in. And nonprofits may try to go back and persuade Congress that, shouldn't we pass some kind of rule that everybody should be allowed to take a deduction?
It's what people call a universal deduction. And it's the 100th anniversary of the charitable deduction.
So charities are going to try to push and hope that maybe Congress will say, this would be a good idea to encourage charitable giving.
So, Stacy Palmer, we have got, what, 10 days left in December before the year, before it becomes 2018.
What could people do now, if they want to try to head this off in some way or to make sure that they do the giving that they want to do?
It's a good year to give very generously.
And a lot of people are doing that. And you have until December 31. If you make an online gift, as long as it's on your credit card right up until then, you still have some time to take advantage of it and take advantage of current law. And a lot of people are doing that now and pre-paying as much as they can.
And I read that there is also some advice for older Americans. There is a way they can talk to their accountant about how they take retirement.
There is something where you can give from your retirement account. And that rule didn't change. And you can give very generously. You're required to give every year out of your retirement account if you're 70-and-a-half and older, and that's a great way to give tax-free.
All right, Stacy Palmer with "The Chronicle of Philanthropy," thank you very much.
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