Among the numerous partners in the charitable sector that have been meeting with lawmakers about the potential impact of tax reform is religious givers. The religious subsector still receives the highest share of giving – $122.94 billion or 32 percent of total giving according to the 2017 Giving USA report – and would be significantly impacted by policy changes that could harm charitable giving.
“The changes that will be made in tax reform will be in place for a generation, so now is the time to make sure that members of Congress understand what the issues are,” said Brian Walsh, executive director of the Faith and Giving Coalition.
Walsh’s coalition is made up of faith-based organizations and communities who provide resources to those in need. Its sole focus is making sure charitable giving continues to be protected in the tax code.
“It’s important to know that a five percent reduction in charitable giving would have significant consequences for many needy people and for many small congregations who already are struggling just to keep the lights on. I think this is an issue that resonates with members of Congress and their staff so they need to be told about it,” Walsh said.
A study released last month from Independent Sector and the Indiana University Lilly Family School of Philanthropy examined the effect current tax proposals, such as an increase in the standard deduction and a decrease in the top marginal tax rate, would have on charitable giving. It’s a study Walsh has been sharing often on Capitol Hill. The study found that giving across the board would be reduced by 4.6 percent, or as much as $13 billion, and religious giving in particular would be reduced by 4.7 percent should these proposals become law.
“There is nothing objectionable in those proposals from our perspective and we do not oppose an increased standard deduction. It’s the unintended consequences of those provisions that cause concern. Our job is to make sure lawmakers are aware of these unintended consequences and that there will be a $13 billion hit on charitable giving unless a universal charitable deduction is enacted,” Walsh said.
Increasing the standard deduction would cause a drop in giving because it would dramatically reduce the number of people who itemize to approximately five percent of taxpayers, according to the House Republican blueprint for tax reform released last year. This makes 95 percent of taxpayers ineligible to claim a charitable deduction. The Independent Sector/Indiana University study found that enacting a universal charitable deduction – which would allow all taxpayers to claim a charitable deduction whether or not they itemize – would not only negate this drop, it would cause giving to increase.
“The universal charitable deduction is a great solution, particularly for religious giving. If you implement a universal charitable deduction along with an increased standard deduction, you not only offset that $13 billion, you also get an increase in giving of $5 billion which is a net benefit and a positive for the charitable sector,” Walsh said.
The intricacies in complicated and comprehensive tax legislation can often be lost, and Walsh is hoping the efforts of his group and others in the nonprofit sector can continue to educate lawmakers in a year where tax reform is as likely to occur as any time since 1986.
“Right now, Congress is not as focused on the impact of tax reform on the charitable sector. Much of what members of Congress read about regarding tax reform and charitable giving glosses over the indirect impact on charitable giving, even though the charitable deduction would technically not be touched under these proposals. Our job is to make sure they are aware of these issues,” Walsh said.