Trump Tax Plan Leads to $54 Billion Decline in Charitable Giving

As the president works to limit access to welfare programs in the United States by creating strict work requirements, lowering the poverty thresholding and purging food stamp rolls, Americans living below the poverty line may also find it harder to depend on private charity for help.

New data shows that Americans itemized $54 billion less in charitable donations this year, after the enactment of the Republican tax plan, the Tax Cuts and Jobs Act. At the time of the bill's signing, some economists predicted there would be a significant drop in donations, but not to this extent.

"The amount is just jaw-dropping," Michel Nilsen, vice president of communications and public policy at the Association of Fundraising Professionals, told MarketWatch. "This is a really significant drop. This to me is a sign that giving was hurt."

Trump Tax Form
US President Donald Trump kisses a sample of the proposed new tax form as he meets with House Republican leaders and Republican members of the House Ways and Means Committee at the White House in Washington, DC. NICHOLAS KAMM/AFP/Getty

The president's tax bill doubled the standard deduction, which gives tax-payers less incentive to itemize deductions like charitable donations. Of course, some people continue to give to charity even if they don't itemize their tax returns, but they don't receive any extra breaks for it.

Analysis by the Tax Policy Center found that the TCJA reduced the marginal tax benefit of donating to charities by 30 percent in 2018, which raised the after-tax cost of making a donation by seven percent.

A new report by Giving USA found that there was a 1.7 percent decline in overall giving to charity organizations last year and a 1.1 percent decline in dollars from individual Americans given, or a 3.4 percent decline when adjusted for inflation.

This represents the first drop in individual giving since 2013. In 2017, giving increased by 5.7 percent.

"Typically, individual giving will track with growth in GDP, which was pretty robust in 2018, and with growth in household income, which was also strong," said Rick Dunham, chair of the Giving USA Foundation. "The tax changes may be why individual giving was flat overall."

A Fidelity Charitable survey found that over a third of financial advisers are not telling their clients to change the way they give money because of tax-reform.

Some Representatives, like New Jersey Republican Chris Smith have introduced legislation to allow for charitable tax deductions outside of the standard deduction. But the bill doesn't have much traction and is unlikely to come to a vote anytime soon.

"Many Americans want to give generously to charities, but they may not be able to afford to do so now with the changes implemented in the 2018 tax law," Smith said.

"My legislation would fix this problem, protecting taxpayers while encouraging continued support to charities. Charitable organizations—churches, synagogues, homeless shelters, soup kitchens, job training programs, and all other groups that do heroic work helping the vulnerable among us every single day—depend on the generosity of taxpayers, and they could once again benefit under this bill."