Black Friday, Small business Saturday, Cyber Monday and then Giving Tuesday. If you work in, or support a nonprofit, you are familiar with Giving Tuesday as part of the end of the year appeal for donations. It’s part of virtually every nonprofit’s fundraising plan.
But as the current tax plan makes it’s way through the halls of Congress, I can’t help but wonder was last Tuesday the last Giving Tuesday ever?
The tax bill could profoundly affect charitable giving, and therefore, LA’s theaters and other nonprofits. Below are some things to pay attention to as you consider the GOP tax plan.
What is a tax-deductible donation?
For better or worse, we as a country have decided to enshrine charitable giving in our tax code (think for a moment how many times you’ve read a sentence like “please consider a tax-deductible donation”). You make a donation – you get a tax deduction. In effect, the government is picking up part of the donation. Depending on your tax bracket, the government is saying you make the donation and we’ll cover a percentage of it.
H this isn’t the only reason people are making donations. But nonprofits use “tax deductible” as not only a fact but also a selling point of the donation. We’ve come to rely on deductibility as part of charitable motivation.
Schedule A means what?
In order to take a charitable deduction you need to forego the “standard deduction” and instead itemize your deductions. You only do this if your itemized deductions would end up being higher than the standard deduction.
The proposed Senate bill doubles the standard deduction and also eliminates other itemized deductions (i.e. medical expenses). Combined, this means fewer people (read: fewer middle class folks) will end up itemizing deductions.
In effect, this means that charitable giving for that group of people (i.e. anyone not itemizing deductions) will no longer be “tax deductible” in the broadest sense. Yes, your donation is still “tax deductible” you just won’t be able to take that deduction unless you’re making a lot of money.
Essentially, the government is proposing that charitable giving will now only be useful the very wealthy
So, what does this mean for charities?
One recent NPR piece suggested it could cut charitable giving by $13 billion annually.
That’s a big deal but it doesn’t capture the full picture. The charities most affected by these changes are not going to be large organizations with deep pocket donors,but instead small organizations with middle class donors. That $100 Giving Tuesday donation that normally gets you a tax break will end up being out of pocket. Will that mean that small charities experience a drop in giving?
Charities are already profoundly dependent on their wealthiest donors. If this tax bill stifles charitable giving, that dependence will become even greater. Not only will larger donors wield more influence, smaller organizations will end up bearing more of the burden. Is that a bug of the current tax proposals . . or a feature?
So was that the last Giving Tuesday? I hope not but if this tax bill passes it is going to require some major societal shifts in how we think about and motivate charitable giving in America at precisely the time we need nonprofits to do their essential work.