Ask the grumpies: How will the Republican tax thing affect charitable donations?

FGA asks:

Because I no longer have mortgage interest as a deduction, it actually was better for me to take the standard deduction. My charitable contributions were no longer deductible even though it was many thousands of dollars. I am frankly worried about how this will Impact nonprofits moving forward. Grumpy thoughts?

It should discourage charitable giving because there will be fewer taxpayers who will find it in their interest to itemize, and also with marginal tax rates down etc. the savings for people who itemize will also be lower.  If you’re getting 25 cents back instead of 33 cents, for example, you might be less likely to donate.

I’m not a tax economist, but there are actual tax economists who have predictions, including this article from the Urban Institute/Brookings tax center that has estimates.

There are a few complications of course.  Fears of the future, beliefs about what the government is or isn’t funding compared to what needs funding, and just how the economy is doing will all effect giving, even in the absence of the tax cuts and job act.  Additionally, the increase in donor advised funds has made it more beneficial to put money in the fund all at once to get a tax break and then to hold onto it before disbursing as it gains money.  It made sense for a lot of people who were going to be losing their mortgage deductions to put money in DAF before the tax law went into effect.  I don’t know if that actually happened though.  I assume sometime in the next year or two academic economists will be trying to sort this all out.

I’ve certainly increased my charitable (and political) donations because of Trump, but definitely not because of any changes to the tax code– all of our donations are going in without any tax breaks.  Which does make it easier to donate to places that aren’t tax-exempt (political non-profits, for example).

9 Responses to “Ask the grumpies: How will the Republican tax thing affect charitable donations?”

  1. nicoleandmaggie Says:

    ICE raids started Thursday night. Here’s scripts to call to protest them: https://twitter.com/Celeste_pewter/status/1149416588367425536

  2. bogart Says:

    Like many anti-Trumpers, we increased our charitable giving dramatically in 2017. Then the tax law changed. And 2018 was an election year. And political contributions aren’t tax deductible. We therefore decided to use an alternating-year strategy, clumping our charitable (tax-deductible) contributions in odd-numbered years (and itemizing) and our political donations in even-numbered years (we do of course realize some states, etc., have elections in odd-numbered years, but our state’s are even-numbered, and in any case we mostly give to aggregating organizations, etc., that focus on federal offices) — and not itemizing.

    We are definitely giving more than we used to, to both kinds of groups/causes.

  3. nicoleandmaggie Says:

    • Altruism researcher Says:

      Hi there – this is one of my areas of research… and one interesting aspect of it is that there are some differences between devoted households (religiously) and nondevoted, and giving to religious versus nonreligious causes. Nonreligious households and giving are more responsive to tax changes than religious households and giving.

      • nicoleandmaggie Says:

        Interesting!

        The folks tithing to multi-millionaire preachers with personal jet planes whose churches have giant electronic billboards probably aren’t thinking much about their tax deductibility. (And I imagine their tax brackets aren’t generally in the higher levels either, making tax policy less costly for them, though I’m sure you control for that.)

      • Veronica Says:

        I’m religious, and I think my faith absolutely requires me to give to others, whether in terms of time, money, compassion, whatever. (Not because “I always obey my TV preacher” but because I think “You shall love your neighbor as yourself” is a principle worth trying to live by.) So the crappy new tax implications aren’t going to change my individual behavior, even though I do itemize and they did affect me this past year. (I do worry quite a bit that destroying the social safety net and simultaneously removing incentives to donate to charity is likely to hurt a lot of people.)

        But I am wondering . . . has much research been done on where religious people actually donate? Jet-setting preachers were mentioned, and I know that is a thing. I can say that my money goes to charities that feed people, help with disaster recovery, and aid refugees. But I literally have no idea what percentage of money donated by religious people is spent on trivial or wasteful causes (like televangelists’ mansions and personal jets) and what goes to things that are really trying to help people. Do you know if anyone has studied this?


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