THREAD
I’ve seen many responses from the nonprofit community in response to the recent tax changes, especially those of us involved with fundraising. This article by Patrick Rooney @IULFSOP is among the best I’ve seen. marketwatch.com/story/charitab… 1/
I’ve seen many responses from the nonprofit community in response to the recent tax changes, especially those of us involved with fundraising. This article by Patrick Rooney @IULFSOP is among the best I’ve seen. marketwatch.com/story/charitab… 1/
If you’re interested in how the numbers work, I recommend reading it. I’ll wait. 2/
I hear many fundraisers and consultants say, “People don’t give because of tax incentives,” or “People give because they’re passionate about the cause.” The second is right. But the first is wrong. 3/
Just as there are many donors, there are many motivations. Different people might have different reasons, and a single person might have several reasons for giving. 4/
But wait, there’s more! People in different income levels tend to have different charities they’re close to. And, people who have higher incomes – and, likely, higher wealth – tend to be more sensitive to charitable tax incentives. 5/
And those people with higher incomes are, frequently, the same people making larger gifts to charity. Whether you think of it as more money available for giving, or sensitivity to the tax incentives, larger gifts often come from those with the capacity to make those gifts. 6/
Another wrinkle is that the decision making process for a charitable gift is actually in 2 stages – whether to give, and how much to give. It can be a very fast process or a slow one. 7/
And while the first part – to make a gift – is often emotional, the second part – how much – is often more rational. And that’s where the tax incentives come in. 8/
If you’re considering a large gift, whether large for your personal means or large enough to think about income tax considerations, you may start running the numbers. And when you run the numbers, the tax policy may have two effects. 9/
The first effect the tax policy may have is its incentive for charitable giving. This is reducing the “gift price” – it costs less to give $1 if there is a charitable deduction available. The new tax law makes it harder to itemize b/c of the higher standard deduction. 10/
The 2nd effect: tax policy affects how much money you have available. As the article at the top shows, for many, a higher std deduction but giving up pers exemptions is not going to result in more pocket money. That may also lower giving. 11/
But wait, there’s more! When more people have less money available – more people are likely to need social services, often provided by… nonprofits (as @eotaxprof notes). Human services NPOs are 1/3rd of US nonprofits but see 1/10th of the gift revenue. Why the disparity? 12/
As noted, people give where they have a personal interest, a passion. For many human services NPOs, their donors are not in the groups likely to benefit the most from the new tax plan, esp in a few years. 13/
I meant to tag @iuphilanthropy for the article - my bad tweeting!
But the big number of charitable giving – the 2% of the GDP number – is influenced a lot by those very large gifts, and by those very high income people. Surely they will have more money available to give? And here’s the rub. 14/
Those very high income people are also much more sensitive to tax incentives. And those tax incentives are dropping. And that’s a big reason why the tax plan is predicted to have such a negative effect on overall giving to charity. 15/
As for the short-, mid-, and long-term effects on the nonprofit sector, we’ll see. It’s a remarkably creative, driven, and resilient sector. But like all of us, it lives in and responds to an environment shaped by policy. 16/
Read Rooney’s article if you have an interest. marketwatch.com/story/charitab… It’s evidence-based and really well constructed. END
