Giving Generously



With the passage of federal tax cuts and the Jobs Act in late 2017, nonprofits held their collective breath to see how charitable giving would be impacted. They worried that contributions would decrease as a result of the higher standard deductions allowed under the new tax law. The old law allowed standard deductions of $6,350 for individuals and $12,700 for married couples filing jointly; the new law nearly doubled that, raising the standard deductions to $12,000 and $24,000, respectively. 

While most people’s interest in philanthropy isn’t driven by tax considerations, charitable organizations feared the worst because the tax incentive to give had been eliminated for many taxpayers.

According to the National Philanthropic Trust, Americans gave $427.71 billion to charitable organizations in 2018, an increase of 0.7% over 2017 giving levels. Interestingly, the Urban Institute reports that there are a total of 1.5 million charitable organizations in the United States. To those, a majority of charitable contributions went to religious organizations (29%), educational institutions (14%), human service providers (12%), grant-making foundations (12%), and finally, health services firms (9%). 

Some early evidence suggests that the Tax Reform Act did depress charitable giving by individuals. Of the total $428 billion contributed in 2018, corporate giving increased to $20.5 billion or 5.4% more than in 2017, and foundation giving increased to $75.86 billion, 7.3% more than in 2017. Since total giving was only up 0.7%, simple math indicates that individual giving declined in 2018. We should be cautious, however, in concluding that a one-year decline can be attributed to an increase in the standard deduction.

Let’s dig a little deeper into who is contributing and supporting charitable causes and how they provide their support. The Indiana University Lilly School of Philanthropy’s biannual survey in 2018 showed that 90% of all “high net worth” households in the U.S. gave to charity, with donors contributing an average of $29,000 annually. This level of giving compares to about $2,500 per year given by “general population households.” An interesting side note is that charitable giving appears to be a learned trait, as adults are far more likely to become givers if their parents gave. 

“Donor-advised funds” have become the vehicle of choice for high net worth families for distributing their philanthropic dollars. In 2018, there were 463,622 donor-advised accounts, according to the National Philanthropic Trust. These funds held roughly $110 billion in assets and dispersed $29 billion in 2017, the latest year for which data is available. Anyone interested in creating a donor-advised fund can get assistance through the Community Foundation of the Lowcountry here on Hilton Head Island.

Another way Americans contribute to charitable organizations is through volunteering. Every year approximately 77 million Americans, 30% of our adult population, donate their time and talents and make a difference. To put a number on this, the Corporation for National and Community Service calculates that the national value of volunteer time is $24.69 per hour. The total value of volunteer hours donated to American communities is $167 billion over and above dollars contributed. Volunteer hours were spent supporting religious institutions (32%), sports, hobbies and the arts (26%) and youth mentoring (26%). 

According to “Giving USA,” the longest running, most comprehensive report on philanthropy in America, philanthropy in the the United States accounted for 2.1% of our gross national product in 2018. In Beaufort County giving opportunities abound, with a total of 1,412 non-profit and 501C3 organizations filing tax-exempt status in 2019. These organizations report almost $600 million in total assets and $326 million in total income. 

The bottom line appears to be that American philanthropy is alive and well for both corporations and individuals. 

Elihu Spencer is a local amateur economist with a long business history in global finance. His life work has been centered on understanding credit cycles and their impact on local economies. The information contained in this article has been obtained from sources considered reliable but the accuracy cannot be guaranteed.