Last week the Twitter account for Republican members of the House Ways and Means Committee sent out a cheery Tweet proclaiming that “Despite dooms-day claims that donations would drop, charitable giving amounts are at an ALL-TIME high after GOP #TaxCuts.” The “dooms-day claims” comment is no doubt in reference to several reputable studies showing that charitable giving is likely to drop due to some provisions in the 2017 Tax Cuts and Jobs Act (TCJA) that will significantly reduce the number of taxpayers who can take advantage of the charitable deduction. Although I certainly don’t consider myself a “dooms-day” type of person, I must point out that this Tweet is based on a faulty interpretation of recent data on charitable giving for 2018. In fact, an objective analysis of these data raise several red flags that should be of concern to anyone who cares about supporting a strong nonprofit sector.
Let’s start with the fact that we will not have definitive data on how charitable giving fared in 2018 until later this year at the earliest because it takes time to gather and assess key data such as the charitable deductions people claimed on their 2018 tax forms. However, two recent studies, both based on tracking the fundraising activity of a group of nonprofits, offer some early indicators that are a cause for concern not celebration.
One report that has been getting some attention is the 2018 Charitable Giving Report from the Blackbaud Institute for Philanthropic Impact. The report shows that overall giving in 2018 increased 1.5 percent from 2017. Although we always like to see data showing that charitable giving is going up, it’s important to note that this increase did not keep up with the 1.9 percent rate of inflation in 2018. The 1.5 percent increase for 2018 is also much smaller than the 4.1 percent increase that Blackbaud reported in 2017 and the combined 9 percent increase since 2016. Also of concern, smaller nonprofits with annual fundraising of under $1 million saw a 2.3 percent drop in donations.
There are also warning signs of a potential giving slump in the monthly Blackbaud Index, upon which Blackbaud’s 2018 report is based. According to the Blackbaud Index, overall giving in December 2018—which traditionally is the strongest month for charitable donations—dropped 2.3 percent from December 2017.
A second recent study found a similar lackluster increase of 1.6 percent in giving for 2018, this study coming from the Fundraising Effectiveness Project (FEP), an initiative of the Association of Fundraising Professionals (AFP) and the Urban Institute. One big red flag in this report is that the total number of donors in 2018 dropped 4.5 percent from 2017 levels, and new donors decreased by a bigger margin of 7.3 percent. Another warning sign: while donations of $1,000 and more grew by 2.6 percent last year, according to the report, gifts of $250-$999 dropped by 4.0 percent and gifts under $250 dropped by 4.4 percent.
Small and midsize contributions tend to come from low- and middle-income donors, who also happen to now be much less likely to itemize their taxes to take advantage of the charitable deduction due to the TCJA’s doubling of the standard deduction. Smaller nonprofits, which typically rely on smaller donations from a larger pool of donors, appear to be suffering the biggest early brunt from these drops in giving and donors.
If you look at the latest data on 2018 charitable giving, it’s clear that rather than celebrating we should be taking action. Next week more than 240 philanthropy leaders will be coming to Washington, DC for United Philanthropy Forum's Foundations on the Hill. One of the key points they will raise with lawmakers is that we need to offer every American taxpayer an incentive to make a charitable donation, not just those who itemize their taxes—mostly the wealthy. Not only is this the fair thing to do for all Americans and for the American tradition of giving, it is the right thing to do so that charitable organizations can continue raising the funds they need to achieve their critical missions in communities across the country.
President & CEO, United Philanthropy Forum
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