But expanding the charitable deduction to 100 percent of taxpayers would result in an estimated $4.8 billion in donations to charitable organizations, including religious institutions
Press Release – (WASHINGTON, May 18, 2017) – Current tax reform proposals by Republican lawmakers and the Administration would decrease charitable giving by an estimated $13.1 billion, according to new research commissioned by Independent Sector and conducted by the Indiana University Lilly Family School of Philanthropy.
The study also found that when those proposals incorporated an expanded charitable deduction for all taxpayers, including people who do not currently itemize on their taxes, charitable giving would actually increase by an estimated $4.8 billion.
Americans are generous but research has consistently shown that people do give more when they are incentivized to do so through the tax code. In 2015, Americans gave more than $373 billion to charitable organizations to fund strong arts and culture organizations; increase access to education and healthcare; create opportunities for escaping the cycle of poverty; help military veterans; mentor youth; and protect the natural world.
The new tax study used the 2014 Tax Reform Act introduced by then House Ways and Means Committee Chairman Dave Camp (R-MI) to estimate the potential effects of tax policies on charitable giving. The tax proposal released by the Trump Administration last month and the Republican proposal both closely mirror the Camp proposal with respect to reducing the top marginal tax rate and increasing the standard deduction.
“We took the position last year that expanding the charitable deduction to 100 percent of taxpayers would encourage all Americans to give more and ensure that more dollars were being put back into communities for local, effective solutions,” said Daniel J. Cardinali, president and CEO of Independent Sector. “We are encouraged that the research shows that expanding the deduction has the potential to more than offset the estimated loss in charitable dollars resulting from current reform proposals. Those charitable dollars improve lives and the natural world for all Americans.”
“When talking about changes in tax policy, it is important that the debate is informed by research. This study provides important information about the expected effects of the proposed tax policy changes and the extension of the charitable deduction to non-itemizers,” said Patrick M. Rooney, associate dean for academic affairs and research at the Indiana University Lilly Family School of Philanthropy.
“On the face of it, the tax reform blueprint from the Administration and Republican lawmakers appears to preserve the charitable tax deduction, which is good news,” noted Susan Dreyfus, chairman of Leadership 18 and president and CEO of the Alliance for Strong Families and Communities. “However, there are unintended consequence of reducing the incentive for charitable giving, according to this new research. Fortunately, this study provides data that indicates there is a simple fix. By making the charitable deduction available to all, including non-itemizers, the incentive to give will be preserved.”
“America is recognized around the world for our charitable spirit and ability to come together as a nation in times of need to solve social problems,” said Brian Gallagher, president and CEO of United Way Worldwide and standing vice chair of Leadership 18. “Americans will never stop giving, but we know that tax incentives are important to how much they give. And for the human service organizations that comprise Leadership 18, charitable giving represents a majority of our funding, which enables us to fill the gaps in social services for vulnerable families.”
In addition to looking at overall giving, the study looked at how changes to tax policy affects giving to religious institutions and found proposed tax reform plans would reduce charitable giving to religious organizations by 4.7 percent compared to 4.4 percent to other types of charities.
In March, IS also conducted a public poll of 800 registered voters and found that 75 percent of American voters wanted to expand the charitable deduction to taxpayers who do not itemize on their taxes. IS will be continuing to work closely with Congress and the Administration to ensure that tax policies strengthen the charitable community’s ability to meet missions, provide services, and improve lives for every American.
Learn more about Independent Sector’s public policy work and this study at independentsector.org/deduction.
Learn more about the Lilly Family School of Philanthropy’s research at philanthropy.iupui.edu/research.
Independent Sector thanks Leadership 18 for supporting this work.