Ensuring that Charitable Giving is Accessible to All Americans

Jul 1, 2019 | Fundraising and Giving, Philanthropy Journal, Resources

Policymakers agree that the American spirit to give in support of our neighbors and communities should be easily accessible to all Americans, not just the wealthy. Calls are growing for a “universal tax deduction,” which would level the playing field for all taxpayers.

Susan N. Dreyfus

Susan N. Dreyfus, CEO of the Alliance for Strong Families and Communities

Brian Gallagher

Brian Gallagher, CEO of United Way

Special to the Philanthropy Journal

By Susan N. Dreyfus and Brian Gallagher

One of the hallmarks of the American spirit is our willingness to come together as a nation when any of us are facing life’s challenges. Whether we are responding to a national disaster, homelessness, or the challenges faced by those returning from military service, the vast majority of Americans are charitable in nature and in deed.

The primary conduit for this charitable spirit is community-based, nonprofit organizations that work across the nation to provide the support that enable all children, families and individuals to reach their full potential.

That support is delivered in many ways, through faith-based organizations, early childhood development centers, domestic violence shelters, food banks, senior services, mental health services, after school programs, and much more. In fact, one in five Americans receive some form of support each year from community-based human services organizations.

For more than 100 years, the charitable tax deduction has encouraged individuals to contribute a portion of their income to support the work of these organizations who enable families and individuals to move through difficult times. Research has shown consistently that America has been able to further incentivize charitable giving through the tax code. In fact, in 2017, charitable giving exceeded $424 billion, according to the Giving USA Foundation.

However, economists, policymakers and those in the nonprofit and faith-based community have concerns that recent changes to the tax code have reduced that incentive by limiting the number of people who take advantage of tax deductions for charitable giving.

A new report just released by the Giving USA Foundation supports those concerns. The report finds that charitable donations from individuals declined by 3.4 percent from 2017 to 2018 after adjusting for inflation, the largest drop since the financial crisis.

Because of the law’s increased standard deduction, fewer households are itemizing their taxes and taking advantage of charitable deductions. According to the Tax Policy Center, an estimated 16 million households are expected to use the deduction for 2018, as compared to 37 million in previous years. Their data indicates that religious, education, and human services nonprofits are among those most affected.

High-income households are more likely to itemize their taxes and take advantage of the charitable deduction. In fact, the Tax Policy Center finds that the top one percent of households would receive more than 56 percent of the tax cut. The philanthropic sector should not have to rely on larger gifts from primarily wealthy donors.

The 2018 Charitable Giving Report from the Blackbaud Institute for Philanthropic Impact also shows that the number of donors has declined, dropping by 4.5 percent from 2017 to 2018. This is part of a larger trend showing a decline in giving from 67 percent of all Americans in 2002 to slightly more than 50 percent today.

The report also finds that, while fundraising by large and medium-sized organizations increased slightly, small nonprofits, with annual total fundraising less than $1 million, experienced a 2.3 percent decrease in fundraising results compared to 2017.

Policymakers agree that the American spirit to give in support of our neighbors and communities should be easily accessible to all Americans, not just the wealthy. That is why calls are growing for a “universal tax deduction,” which would level the playing field for all taxpayers.

Legislation introduced by Congressman Danny Davis (D-IL-7) does just that. The Davis bill, H.R. 1260, would relieve all taxpayers – regardless of income level – from paying taxes on money they donate for charitable purposes.

Leadership 18, a coalition of CEOs from some of the nation’s largest human services organizations, supports this important legislation. By expanding the charitable tax deduction to include all taxpayers, we have the opportunity to make it easier for all Americans to give in support of community-based human services organizations and our places of worship. The Davis bill sends a vital message that charitable giving is a key American value and that our country’s public policy is aligned with that value.

This isn’t just a matter of fairness. This is good economic policy. By incentivizing giving to places of worship and community-based human services organizations, we invest in their vital work to support and strengthen individuals and families. When people thrive, our economy thrives.

We are pleased to see that there is bipartisan support for a universal deduction. In 2017, Congressman Mark Walker (R-NC-6) introduced The Universal Charitable Giving Act (H.R.3988), which provides an above-the-line deduction up to one-third of the standard deduction – about $4,000 for individuals and $8,000 for married couples. 

In May 2018, Congressmen Chris Smith (R-NJ-4) and Henry Cuellar (D-TX-28) reintroduced The Charitable Giving Tax Deduction Act (H.R.5771), which also offers an “above-the-line” or “universal” deduction, but without a cap.

All of these bills offer a simple solution that will support all Americans in their desire to donate vital dollars to strengthen their communities through a stronger nonprofit human services sector – one that helps build our economy and ensures that all people have access to the resources needed to live safe, healthy and productive lives.

The spirit of American giving has fueled our nation through times of stress and is a hallmark of who we are as Americans. Let’s make sure that all Americans have the opportunity to participate in our giving society. 

Susan N. Dreyfus is chair of Leadership 18 and president and CEO of the Alliance for Strong Families and Communities, a strategic action network of thousands of committed social sector leaders working in communities nationwide to achieve a healthy and equitable society.

Brian Gallagher is standing vice chair of Leadership 18 and president and CEO of United Way Worldwide, the world’s largest privately-funded nonprofit engaged in nearly 1,800 communities across more than 40 countries and territories worldwide.

Collectively, the members of Leadership 18 serve 87 million people with more than 5.6 million staff and volunteersAll member organizations share a specific mission to improve human development through deep community relationships.

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