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Is 2017 tax law responsible for declining share of U.S. charitable donors?

Thanks to large checks from the wealthy, financial contributions to the 100 largest charities in the U.S. rose 11 percent in recent months. But the share of Americans who give to charity overall continued its long-term slide, with small nonprofits hit the hardest. A number of factors are at play -- including the 2017 tax law. Lisa Desjardins talks to the Chronicle of Philanthropy’s Stacy Palmer.

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  • Nick Schifrin:

    Giving to the 100 biggest charities in the U.S. rose by 11 percent in the past year, thanks to big checks from the wealthy.

    But the overall share of people who give to charity continued a long-term slide. Small nonprofits have been hit the hardest.

    Lisa Desjardins reports that analysts blame a number of factors, including the 2017 tax law.

  • Lisa Desjardins:

    We're seeing those uneven giving trends even in a robust economy, and that's leading many nonprofit leaders to worry as we head into 2020.

    Stacy Palmer, editor of "The Chronicle of Philanthropy," is here to explain more.

    And let's start with this tax change itself. Essentially, fewer people are claiming tax deductions because of their charitable donations?

  • Stacy Palmer:

    Right.

    One of the things that Congress did when they changed the law is, they said, let's make it simpler to fill out your tax form. So they doubled the standard deduction. That means that very few people itemize anymore. Only about 8 percent of Americans itemize, and that means those people all have access to the charitable deduction.

    But everybody else doesn't, because they're not taking a write-off for anything. And so something that was intended to simplify the tax system ended up having this inadvertent affect on charities and giving. So many people just don't have access to that charitable deduction anymore.

  • Lisa Desjardins:

    Essentially, the deduction used to be $12,000 for a couple, for two people, and now it's $2,400.

  • Stacy Palmer:

    The standard — the standard deduction.

    So that amount you can write off when you're doing your taxes and you're figuring out how many deductions do I have, between the mortgage deduction and the charitable, if you're a couple, if you have $24,000 in deductions or more, then you want to take the write-offs.

    But if you don't…

  • Lisa Desjardins:

    But that's not most people.

  • Stacy Palmer:

    Most people don't.

  • Lisa Desjardins:

    Do not have $24,000 in deductions, right.

  • Stacy Palmer:

    Exactly. So…

  • Lisa Desjardins:

    OK.

    So then the question is, now there are fewer people who can deduct, who get a tax benefit from giving to charity, how is that affecting charities? Are they see a big change in their donations?

  • Stacy Palmer:

    Charities think they are, especially small, mid-size groups. They say they're feeling the pain more than big organizations.

    And part of this is because people who are fairly wealthy, they can still itemize and get that tax deduction. But most middle-class to middle-class, affluent people, those are the people who lost that deduction. And they're the ones who don't have any incentive to give because of taxes.

    Now, there are lots of other reasons people give or choose to give, but there's estimates that as much as $20 billion might have been lost to charities in a year because of this tax change.

    Now, we should remember too Americans give more than $425 billion. So $20 billion is important, but they're still giving. People are still giving very generously. So it's not that the entire charity sector has been hit by this tax change.

  • Lisa Desjardins:

    Let's talk about the wealthy. What does their giving look like? We know that their incomes are going up at the top. Are there — is their level of generosity also going up?

  • Stacy Palmer:

    A lot of the people who look at charitable giving think that it's not going up as much as it should compared to their wealth.

    So, certainly, we see very generous contributions. And that's one reason that giving hasn't gone down. But compared to the amount of wealth people have, they just can't give it away fast enough.

    Even people like Mayor Bloomberg, who gives lots of money to charity, he's promised to give it all away in his lifetime. And he still has billions and billions more left to give, because he just gets wealthier.

  • Lisa Desjardins:

    But I want to understand what you're saying.

    Is it a problem of them not having enough outlets, or is it that those at the top are gaining more income than they are giving away? Is it their decision? They're not being as charitable as they are profitable, I suppose?

  • Stacy Palmer:

    It's probably a little bit of both.

    In some cases, if they can't find enough places where they want to give where they think they can make a difference, that might cause a big donor to hold back. But they're also not saying, oh, I just made $20 billion in the stock market, and I need to give it all away.

    So we're not seeing people give proportionately to their increases in wealth. And that's the part that is startling. We haven't seen, in this great economy, an increase in the percentage of income that people are giving to charity.

  • Lisa Desjardins:

    Another issue for some of these especially larger charities, we have seen some scandals involving some of the largest donors, for example, the Sackler family, their connection to the opioid crisis, Jeffrey Epstein, his charges and eventual death related to sex trafficking charges.

    How has that affected the giving community, and especially these big institutions that seem to depend on the wealthy? How — what is that relationship like? Is there too much dependence on big donors? And how has that changed?

  • Stacy Palmer:

    Big nonprofits are really looking at their relationships with big donors, especially in these cases like Sackler and Epstein, where they have to think, what are our values? Is it appropriate for us to take money from those kinds of people?

    Because some alumni, for example, of institutions that took money from Sackler or Epstein, they might not want to give anymore because they're disappointed in their institution. So, it has a ripple effect, not just that they took money from that one donor, but whether other donors are going to be disappointed.

    So, many of them are indeed looking at, what policy should we have? How should we articulate who we're going to accept money from? And should we make it clearer that really we depend on lots of small gifts and middle-size gifts from people? Is it good to be run by all of these billionaires?

    Those are big questions that people are asking. So, you see this in the political debates about wealth taxes and other things. It's the same kind of consideration that's going on in the nonprofit world, too.

  • Lisa Desjardins:

    What about the small nonprofits? That's the vast majority of them, are just a few people with a community concern. They don't have those big, wealthy donors. How are they doing right now?

  • Stacy Palmer:

    Smaller charities are struggling to be able to persuade people to give. There's a lot of competing causes.

    And middle-class donors are giving less. We have seen a staggering drop in the number of middle-class Americans who are giving. Perhaps, in this decade, we saw as many as 20 million fewer people are giving to charity.

    So, as people are giving less, it's harder and harder for some of those small nonprofits to attract as many people as they need to give.

  • Lisa Desjardins:

    Stacy Palmer with "The Chronicle of Philanthropy," thank you.

  • Stacy Palmer:

    Thank you.

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