15 November 2017

The Evidence is Stacking Up: Current Tax Reform Bills Will Reduce Charitable Giving

by Marques Chavez, Communications Director, Alliance for Charitable Reform

New research from the Tax Policy Center has told us how charitable giving will be affected by the House tax reform bill, H.R. 1, the Tax Cuts and Jobs Act, and it’s basically what we already knew.

Even though the House version of the Tax Cuts and Jobs Act (TCJA) preserves the charitable income tax deduction, other income tax provisions of the bill could reduce charitable giving by between $12 billion and $20 billion in 2018, based on new estimates from the Tax Policy Center.

This research is remarkably consistent with a study released earlier this year from the Indiana University (IU) Lilly Family School of Philanthropy which found that the proposals considered in the Republican tax reform plan – such as expanding the standard deduction – could reduce charitable giving by as much as $13 billion. The drop in giving comes as a result of reducing the number of those who itemize to just 5 percent of Americans, which the Joint Committee on Taxation (JCT) confirmed last week would lead to a reduction of $95 billion being claimed as a charitable deduction.

The evidence is now stacking up – the unintended consequence of current tax reform policies under consideration is a reduction in charitable giving. Charities have rallied behind a universal charitable deduction as a way to protect against the consequences of an expanded standard deduction documented by JCT and IU. One legislative option available to lawmakers in the House is H.R. 3988, the Universal Charitable Giving Act of 2017, which was authored by Rep. Mark Walker (R-NC) and would expand the charitable deduction to all Americans.

And just yesterday, Senator James Lankford (R-OK) introduced the Universal Charitable Giving Act in the Senate. Additionally, Sens. Debbie Stabenow (D-MI) and Ron Wyden (D-OR) have offered an amendment to the Senate tax reform bill that would expand the charitable deduction to all Americans.

Both Houses of Congress have legislative options available to them to protect and even expand charitable giving in America. It is up to all of us in the charitable sector to contact our elected officials and tell them how current tax reform bills being considered will affect charitable giving and educate them on the solutions available to them to protect our charities and communities.