Today, new giving data from Giving USA was released showing one of the most significant declines in charitable giving in 40 years. In real dollars, total giving in 2022 fell by 10.5 percent compared to 2021, and individual giving fell by a whopping 13.4 percent. There are many factors that likely contributed to this decline, including an uncertain economy and stock market losses, particularly in the latter part of the year when most giving happens. Regardless of reason, however, these numbers should cause dire concern for donors, nonprofit organizations, and policymakers alike.
Over the next days and weeks, we’ll read reactions to this drop in giving from nonprofit leaders and policymakers across the country. There will be a number of proposed reasons for why giving declined so sharply, and there will be just as many proposals for how to reverse the trend. We may even hear from some that reversing this isn’t a top priority. However, this sharp decline in giving paired with the steady decline in the number of donors over the past two decades is one of the biggest existential threats to charitable giving in the U.S. as we know it.
Even as U.S. GDP grew by 2.1 percent in 2021 (after adjusting for inflation), charitable giving as a share of GDP shrunk to 1.9 percent, a continued decline from 2020 and 2021. Furthermore, charitable giving as a share of personal disposable income dropped to 1.7 percent – a near 30-year low. While Giving USA doesn’t track numbers of donors, AFP’s Fundraising Effectiveness Project most recently reported a decline in the number of donors in 2022 compared to 2021, underscoring these concerning trends.
In short: fewer Americans are engaged in traditional charitable giving than once were.
I want to leave you on a hopeful note, however. I try to make a habit of not presenting a problem without a proposed solution, and we have several opportunities to reverse these trends.
Humans often engage in behaviors for which they are encouraged or incentivized. That is one of the reasons we have tax incentives – in addition to being accounting mechanisms to adjust what we don’t realize as income, tax deductions also tell taxpayers that certain behaviors are deemed good and worthwhile in our society. We encourage homeownership through a mortgage interest deduction, and we encourage generosity through the charitable deduction. So we must ask ourselves, how do we encourage more charitable giving at a time when less and less of it is being done? Perhaps we can start with providing more incentives to more taxpayers. The universal charitable deduction for non-itemizers is an easy start.
We can also look at the ways donors prefer to give. Donor-advised funds (DAFs) are currently the fastest growing giving vehicle, and in times of uncertainty or great need, they’ve proven to be effective rainy day funds to maintain a continuous flow of funds to charities even when donors can’t give as much directly. All the while, there are proposals out there that could restrict giving through DAFs. When giving trends are so dire, these types of giving methods should be protected and enhanced, not discouraged and penalized.
Finally, we have a looming opportunity. Over the next two decades, more than $80 trillion in wealth is going to be transferred to younger generations. Some of that money will indeed find its way into the charitable sector, but we might as well get creative to come up with ideas for how to drive even more of that wealth to civil society organizations that are finding solutions to problems across our country. I’m looking forward to working with colleagues and peers to do just that.