Last month, Independent Sector released polling data on a number of topics related to charitable giving and public policy. Some results are encouraging, while others are quite concerning.
Let’s start with the bad news. Respondents indicated significant concerns about the economy, with 96 percent “somewhat or very concerned” about inflation or experiencing economic stress in the next six months to a year. Of those “very concerned,” almost half (49 percent) said they plan to give less to charity this year than they did last year. For charities, the result could be dire. When we consider inflation and that a dollar donated won’t go as far in today’s economic climate as it did a year ago, coupled with a drop in donations, many charities may be forced to reduce the services they provide to communities in need or close operations altogether. Complicating matters even further is the fallout from recent natural disasters. Demand will continue to be high for nonprofit support, so driving dollars to charities will remain critical.
The better news is that the poll also indicates broad support for expanding charitable giving incentives to all Americans. Under current law, only about 12 percent of taxpayers itemize and therefore take a charitable deduction, a significantly lower number than the 30 percent who itemized prior to the enactment of the 2017 Tax Cuts and Jobs Act. However, results from the poll suggest the majority of Americans see value in a universal charitable deduction for all taxpayers and support restoring the now expired provision. It found 85 percent of Americans support a permanent restoration of the universal charitable deduction for nonitemizers, with 77 percent supportive of expanding the deduction cap to $4,000. The temporary universal charitable deduction was enacted in 2020 but expired at the end of 2021.
While voters are obviously very supportive of expanding the tax incentive to give to charity, some skeptics in Congress and academia suggest the return on investment isn’t worth the expense to the Federal Treasury. And many rightly argue that Americans will still give to charity regardless of the deduction. But the dollar for dollar return is not the full picture of the purpose or result of the charitable deduction.
The charitable deduction exists because it is an effective tax policy. It encourages generous Americans to give away money with no benefit in return, and it recognizes that a charitable gift is not income and should not be treated as such. There are other deductions in the U.S. tax code, such as the mortgage interest deduction, that encourage behaviors deemed good that solely benefit the taxpayer taking the deduction. The only difference between those incentives and the charitable deduction is that the latter has an added public good benefit as well.
Policymakers recognized this reality when they enacted a temporary universal charitable deduction in 2020 and 2021. Data from that time shows gifts of $300 – the exact amount of the nonitemizer deduction – increased significantly in both years. At the end of this year, they have the opportunity to extend the UCD once again, and hearing from their constituents is the best way to secure their support.
So how can you engage?
First of all, you can build relationships and educate federal lawmakers at the local level. They’ll be spending a lot of time back in their home states and districts ahead of the November election, and they’re there to hear about what matters most to their constituents. Check out our recent webinar on district engagement to learn more.
Additionally, between the election and the end of the year, advocates will be making a final push for the renewal and expansion of the UCD during the Grow Giving Now Fly-In, hosted by the Charitable Giving Coalition.
If you’re concerned about declines in charitable giving and you’d like to learn more about how to engage with your policymakers to grow giving, please feel free to reach out to our team!