Yesterday was “giving Tuesday,” and inboxes everywhere were inundated with solicitations, prompting me to consider America’ charitable landscape.
I had recently come across a July, 2019 article published by Marketwatch (not exactly a Marxist publication), reporting the effects of the Republican tax bill on charitable giving. The lede tells the story:
New data on Americans’ tax returns adds to the growing body of evidence that charities are taking a hit as a result of Trump’s overhaul of the tax system.
Taxpayers have itemized $54 billion less in charitable contributions so far this tax season compared to the previous year, according to new IRS stats.
The tax act–signed by Trump in December of 2017– doubled the standard deduction. (As most readers of this blog are aware, the standard deduction is the amount taxpayers can subtract from taxable income to reduce their tax bill, without having to itemize.) Taxpayers can still choose to itemize, but there’s less incentive to do that. Nonprofit scholars predicted at the time that a higher standard deduction would lead to fewer taxpayers itemizing, and that, in turn, would lead to fewer people making charitable donations in order to get a deduction.
Of course, the lack of reported donations doesn’t necessarily mean a lack of actual donations; it is highly likely that people accustomed to giving smaller amounts, or contributing to favorite causes, have continued doing so despite the lack of a tax incentive.
Studies do suggest, however, that charitable giving has taken a not-insubstantial hit. (1.7% doesn’t sound like much, but when the numbers are this big, it represents a significant chunk of change.)
Charities took in an estimated $427.71 billion overall in 2018. When adjusted for inflation, the figure represented a 1.7% decline in overall giving, according to Giving USA, an annual report on philanthropy released last month. The Giving USA estimates are made before final tax data is available, and its estimates are revised and updated as final tax return information about itemized deductions made by individuals, corporations, and estates becomes available.
The data on which the article is based is only for a part of the first year following the passage of the new tax law, and the long-term effects remain to be seen. But the dollar amount of private-sector support for charities is only one element of a charitable landscape that gets far less attention than the dollars involved.
For example, stories about charitable donations rarely point out that, in the United States, we depend upon nonprofit and charitable organizations to address what economists call “government failure.” (We learn about “market failure” in Econ 101. Less attention is paid to the concept of “government failure.”) In other words, Americans expect charity to respond to a number of social needs which in other countries are met by government programs.
A lot of what U.S. tax law considers “needs” sufficient to justify a tax exempt status are appropriately left to the private sector, but to the extent such needs are real and pressing and widely seen as collective responsibilities, a reduction in charitable giving can cause significant hardship.
Muddying the waters even further is the lack of a bright line between genuinely charitable organizations and profit-making ventures sufficiently “on the line” that they are able to obtain a 501 c 3. Is the hospital that pays its chief executive 400,000+ a year simply distributing what would otherwise be profit as salaries? Are donations to the school’s Little League team truly charitable contributions? What about the gift shop or car wash run by the church?
How elastic is our definition of “charity”?
One of these days (clearly not in my lifetime), American lawmakers are going to have to clarify some things: what are the social welfare services that government must provide? What privately-sponsored endeavors are truly charitable, and deserving of tax-exempt status, and which don’t justify the incentive?
Answering those questions is obviously less critical than ridding ourselves of the loopholes/subsidies that allow businesses like Amazon to avoid paying any tax at all on huge profits–but that doesn’t mean they are unimportant.
We need not wait for government to tell us what is a real need and what is not. Any truly charitable person can see the need of others all around themselves if they travel out of their bubble and give the world a real look.
Come on down to the near east side of Indianapolis. Open your eyes to the Hispanic mother at Walmart with three children who have no coats or shoes. Or the obese black woman buying only the stale discounted bread at the store with change. Or the homeless man sitting by the gas station trying to put on a pair of too small shoes with his feet bleeding.
If you need a tax exemption in return for your donation then what you give is not charity; it’s a business transaction.
Kudos, Theresa, Kudos! If neighbors were still neighborly we would be aware of those on our own streets and nearby ares who need help in some form. This is a transient society; neighborhoods are primarily single, isolated behind closed doors, we have no way to know when they are in need and in turn, we cannot turn to them in an emergency.
Granted, we are inundated with E-mails and mail seeking donations for charities but not as many as the political candidates and organizations E-mails and surveys to be completed, always ending with begging for more and more money with their chosen amounts as options.
The increase in the standard deduction probably affected the likelihood of making small donations, but the lowering of the top tax brackets affected the other end. If really wealthy people don’t need a charitable tax deduction to lower their tax bite, will they continue to contribute to museums and orchestras. If they lust for having their names on the walls of buildings, they’ll continue, but otherwise, they will stash that money in the Cayman Islands, along with the rest of their tax-sheltered loot.
Teresa Bowers, yes yes yes!
WAY Back, up until the time of Christ, an idea had developed among those under the Mosaic law. The giving of Alms, or charitable acts, would lead to a better chance of salvation. But, this idea of salvation was promoted in a book called Ecclesiasticus, this is one of the apocryphal books that are not correspond with regular Scripture. The whole ritual of Alms, to give to those begging, was designed as as a grandiose display of magnanimous behavior, giving to the beggars. It also promoted Annie who did not need charity, to make a showy display of their alleged lack of means. This provided those insincere givers a means to self-aggrandize in an overt manner.
But as we look at what we call charitable giving today, it has devolved even more so than those under the Mosaic law who falsely believed it would balance out sinful behavior.
Jesus Christ put it this way in Matthew the 6th chapter starting at the 1st verse; when he warned, “do not blow a trumpet ahead of you, just as the hypocrites do in the synagogues and in the streets, that they be glorified by men.”
But, all you see, people standing in front of microphones, celebrities self-aggrandizing, holding up giant checks from charities named after themselves. Especially this time of year, when you have huge charitable events saying that they are going to shelter the homeless, and feed the hungry, and clothe the needy, but what about the rest of the year?
Christ also said in Matthew chapter, 6; “truly I say to you, they have their reward in full. But you, when making gifts of mercy, do not let your left hand know what your right hand is doing, so that your gifts of mercy may be in secret. Then your Father who looks on in secret repay you.”
Whether you can use your gift of mercy as a tax deduction, well, if that’s why you do it, that is between you and your God. Look at POTUS, he constantly blew his trumpet about his charitable organization, he flimflamed people to even contributing to his charitable organization, then used it as a personal piggy bank. Maybe when we are at the store, and an elderly lady is trying to buy a couple of cans of chili, digging through an envelope counting change, why not just purchase the chili? Why not? The same with stopping in a McDonald’s or a Taco Bell, or anywhere. There are always opportunities to do the right thing. It’s not what you give, it is the intent for which you give.
Proverbs the 3rd chapter and verse 27 and 28 read; “do not withhold good from those to whom you should give it If it is within your power to help. Do not say to your neighbor, “Go away; come back later! I will give it to you tomorrow,” If you can give it now.”
We all must do the right thing, not the self glorifying thing. Empathy, mercy, compassion, all have been co-opted by phony faith. I don’t know about anyone else, but it feels really good to do something for someone who is less fortunate. And I personally grieve for the children, and the unfortunate mothers trying to sustain their families. I definitely abhor those who are out there scamming and taking the bread out of the needy’s mouths.
And we won’t even get into how starting with Ronald Reagan, a wholesale war was declared on the mentally ill. Closing facilities and taking away lifelines, throwing them on the streets. When you really look back on it, the party that considered itself Christian, has done the complete opposite of Christ! When jails and prisons are the largest housers of the mentally ill, it speaks volumes of the moral decay of this country.
Every small not-for-profit is trying mightily to build an endowment fund so they can carry on their work, even when receipts are down. Every large not-for-profit has an endowment fund into which they dump their profits each year, even though the endowment could sustain them for 100 years or more. The notion of not-for-profit has been perverted. Don’t look at status when determining what organizations to give to, look at the mission. And don’t be afraid that your money might be misused if you give to an individual. It’s better to give and have that gift misused than to not give to someone who really, truly needs your help.
I live in nonprofit central. We have a mental health crisis, and the local mental health facility pays its CEO close to $700,000 per year, and their employee turnover is so high among the low paid staff, it would be laughable if people weren’t suffering.
Then you have the YMCA…how in the world did a fitness facility get nonprofit status?
The IU/BMH hospital made a substantial profit this year, and then we have Ball State. Toss in local government and the school systems — all of our major employers are nonprofits.
When Standard & Poors wrote a credit analysis of Muncie, we received an inferior grade, and one of the reasons given was the tax-exempt status of sizable landowners spread throughout the city along with a shrinking population paying taxes. Hmm…we demand more government services, but fewer people are paying for those services.
Toss in the asset poor and those citizens living in poverty; I can certainly understand why giving to “charity” has declined.
We suffer from an Oligarchy extracting more and more for themselves, a group of taxpayers exempt from paying their fair share, and a working-class whose wages aren’t sufficient to provide for a decent living.
As long as the Oligarchy owns our politicians and press, we’ll see little or no changes. While our foreign brothers and sisters protest in the streets, we escape our reality in a variety of ways.
Charitable giving is a wonderful thing but, Sheila makes a chilling point that is easy to gloss over. There is a systemic failure in the US to provide a basic social safety net that is met by a patch work of private sector 501.c3 charitable organizations. We might feel good about low taxes, but US citizens rarely consider that a significant amount of money given to charity is already just covered by basic social services in many other industrialized countries.
I will continue to give to charities regardless of the tax law, but if the government influences even a 1% change in behavior, it is a big hit for a lot of deserving charities.
I also agree that hospitals as 501.c3 organizations does not make a lot of sense. When a group like Ascension Health has so much cash on hand, that they could go 5 years without collecting another bill and still be solvent, they have lost sight of why they were considered a charity.
It also promoted anyone who, sorry! I guess proofreading is not my long suit, LOL.
Todd, makes a good point about the Health Care Industry enjoying the benefits of being Non-Profit. No wonder the vultures in the Health Care Industry including Big Pharma are employing and deploying all the mis-information they can to discredit Medicare For All. We have stooges for these industries in the Democratic Party telling us Medicare For All, is Socialism, or too complicated, etc.
Here is a piece of information many do not know about. The NFL is actually tax-exempt, a status it gained in 1944. Often forgotten, the league was granted 501(c) 6 status in 1966, when it merged with the American Football League. But unlike charitable nonprofits, or 501 (c) 3 organizations, the 501(c) 6 designation means the NFL is a trade organization. This tax-exempt status does not apply to the league’s 32 individually owned franchises. The U.S. Chamber of Commerce is also a 501 (c) 6 organization.
The National Hockey League and the Professional Golfers Association are among other sports groups that enjoy tax-exempt status as a trade organization. https://www.cnbc.com/2014/09/12/tax-exempt-the-nfls-nonprofit-status-by-the-numbers.html
If there was a Political Will for Real Reform, we would eliminate all these various tax deductions and money laundering schemes the wealthy 1% enjoy and we would not need Go-Fund Me and food pantries.
My taxes increased by $6000 in 2018 due to the fact that itemized charitable deductions were limited. I have always felt that paying taxes was my patriotic duty but I would rather the Salvation Army or Dayspring Center or the Humane society had my other $6000 rather than this government.
My guess is that, normally, total giving in the U.S. does not change much from year to year. But it may change a lot in its accounting processes. Yet, when it does change radically, it certainly is a marker by which some new policy can be measured. Still, the measure of American giving is a complicated process. It is made more complicated by our varied reasons for giving or for not giving and by our biases regarding whom to give to and whom not to give to.
Choosing an individual or a family to help may be simple for an individual who is bent toward direct person-to-person giving. But the help and giving, which organizations provide, is much more difficult to target accurately without making the two mistakes that look so inept–giving to people who don’t need it and failing to help people who do need it.
Nevertheless, givers to non-profit organizations must trust the organization to choose who gets helped and who does not. The non-profit cannot stroll through Walmart and pick this person or that family to help. The Non-profit has to use a systematized sorting mechanization of some kind, which by needs of efficiency, will be impersonal and mostly paperwork, and it will miss the mark in its choices occasionally, maybe often. That’s the best they can do.
However, sometimes human need is so great, as in major calamities, that non-profit organizations, or government, are the only entities capable of providing quick and sufficiently large help.
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Interesting AND DISAPPOINTING: in general, I have found in my experience that those people who prefer direct giving (person-to-person) over institutional giving often make that choice because direct giving allows them to discriminate among the needy. Direct giving guarantees that a bigot’s money does not go to the wrong race, wrong sex, wrong religion, etc., but institutional giving takes that act of discrimination away from them. I know people for whom the idea of institutional giving makes them almost physically sick.
Thus, a noticeable drop in institutional giving may indicate, at least partially, an increase in bigoted decision making in regard to giving.
Modern society is a very complex inter tangled mess of barely related things: income tax law, real charity, charity for profit, property taxes, giving to street beggars, wasted food and clothing and shelter. We do need legal house cleaning but who’s got the time and what politician wants to work that hard on non critical improvements that will be hardly noticed by constituents or at least scarcely rewarded with votes or donations?
It’s more than legal issues though. It’s much bigger. Our entire machinery of life is no longer up to the task of connecting problems and problem solvers and doers and needs. When things were simple a few people conceived of the market as an organizer of people and it worked marvelously for centuries but now it’s unmatched with modern needs. Do we have any philosophers capable of actually designing some replacement more suited to the problems we have? People banter political and commercial concepts around but most of them have been tried and failed. Where are the new ones? Who is even thinking about them? Who is capable of thinking about them? Who has time to without starving?
Todd,
Young Men’s Christian Association
Leslie,
The government needed your $6,000 so they can give the corporations a huge tax break, and of course the military needed billions and billions in additional spending.
>Pete
“Do we have any philosophers capable of actually designing some replacement more suited to the problems we have?…Do we have any philosophers capable of actually designing some replacement more suited to the problems we have?”
There are about 44 million retirees in the U.S. and .0000625% of them (percent of U.S. workforce that works in some sort of philosophy pursuit) were professional philosophers. Thus, we have about 2,750 living, non-starving philosophers with nothing to do but think about your proposal.
An idea was proposed by Richard Nixon (of all people) that would have helped all low-income families – the Family Assistance Plan, meant to provide a minimum income to every family, not just the “deserving poor”. Of course it went nowhere, but it sounded like something that was worth a shot. I personally give my mite to needy people and needy animals and don’t worry about whether or not it affects my taxable bottom line (it doesn’t). As for philosophy, Jesus solved that one by saying we should render unto Caesar what is Caesar’s and unto God what is God’s; we have to figure out which is which. I, too, hate the current tax laws that have meant a decline in charitable giving, that is all some people have.
Let’s focus on donations doing more – too many have significant administrative costs and, while noble, run programs year after year without measuring impact on their target.
There are some folks thinking outside that box: https://research.upjohn.org/cgi/viewcontent.cgi
Trump Administration Cutting Off Food Stamps for Nearly 700,000
The Department of Agriculture approved the first of three rules that are ultimately expected to cut 3 million from the federal food-stamp program. NY Times 12/4/19