Wednesday, June 12, 2019

Federal Tax Policy and Individual Charitable Giving

The Independent Sector recently released research on the relationship between federal tax policy and individual charitable giving. The study attempts to quantify the lost individual charitable revenue from the 2017 tax changes, and the effect that these five new policies would have on charitable giving:

  1. Deduction identical to itemizers’ tax incentive;
  2. Deduction with a cap in which gifts over $4,000 or $8,000 do not receive an incentive;
  3. Deduction with a modified 1% floor, in which donors can deduct half the value of their gift if it is below 1% of their income and the full amount of the donation above 1%;
  4. Non-refundable 25% tax credit; and
  5. Enhanced deduction that provides additional incentives for low- and middle-income taxpayers

The study concludes that "all five policies could bring in more donor households and four of the five policies could bring in more charitable dollars than could be lost due to recent tax changes[, and f]our of the five tax policies could generate more giving than cost to the government."

-Joseph Mead

https://lawprofessors.typepad.com/nonprofit/2019/06/federal-tax-policy-and-individual-charitable-giving.html

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Comments

Interesting take but think the study itself suggests that there may be much larger issues affecting charitable giving than tax policy. The study's executive summary notes that the percentage of American households that donate each year to nonprofits has declined from 67% of households in 2000 to 56% in 2014. That is several years before the 2017 Tax Cut and Jobs Act (which took effect in 2018) changed the fundamentals of charitable tax policy by substantially increasing the standard deduction, thus reducing the value of itemizing. It seems to me that it is much more important to find out and address what caused the drop in household charitable giving in the first place than attempt to put a band-aid on the problem with further tax reform.

Posted by: Joe Cosby | Jun 13, 2019 5:17:05 AM

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