The announced changes to the tax code for 2018 has the non-profit sector prepared for the anticipated negative impact on charitable giving. When asked, I take a more optimistic view. Giving to those less fortunate than oneself is a deeply held and widely shared American value that is reflective of a belief that we are, actually, all in it together. Charitable giving is supported by the US tax code in recognition of the role it plays in society but long predates it. In 1928, when US personal expenditures totaled $77 Billion $2.5 Billion was donated to charities. US charitable giving hovers around 2% of GDP (recognizing of course that some people give very little while others give substantially) despite the ups and down of the economy and despite changes in the tax rates. One can argue, of course, that donations could be a bigger slice of the pie – but in my view the size of the slice might be influenced by a host of factors but it is not determined by solely by the availability of tax deductions.
When asked to help the victims of an earthquake or a hurricane we typically don’t pause to consider the tax benefits. Sustaining the vibrant arts and cultural institutions that nurture our communities is not an activity driven by the charitable deduction. Wanting to contribute to the efforts to find new medical treatments or to cure diseases will not stop because fewer of us will itemize deductions. We engage in these activities because we have a strong human impulse to make things better.
It is possible that some charities may see a small dip as donors re-equilibrate. But in general I am convinced charitable giving will remain robust.
So what should non-profits be doing? Inspire givers with aspirational opportunities to do good where it is possible. What should wealth managers/advisors be doing? Offer a vision of what is possible for those who have been fortunate to do good with their funds and re-inforce philanthropy as a shared public virtue.
What about private support for scientific research? I see it only growing into the future. In many ways it is the perfect synergistic partnership – investing today for our shared future. Fueling the light of science is also a rich tradition of philanthropic giving. Here’s to a bright 2018.