Following the recent U.S. presidential election, questions have been raised about the potential impact on philanthropic giving. Such questions arise, in large measure, from overall economic uncertainty and potential changes to the U.S. tax code.
History can be instructive in this regard. What we have learned is that giving grows at higher rates in strong economic times and slows during periods of recession. Philanthropy grew modestly throughout each of the five U.S. economic recessions occurring between 1967 and 2008.
There are only two instances over the last half-century when philanthropy declined in real dollars year-over-year. The first followed the 2008 global financial crisis. The second came after the enactment of the Tax Reform Act of 1986, which resulted in exceedingly generous giving in anticipation of tax changes the following year.
President-elect Donald Trump’s proposed tax plan contains some provisions that may reduce tax incentives for giving. Two significant proposals would limit total deductions and eliminate the estate tax. Proponents of this plan argue it will stimulate the economy and the benefits will far outweigh any charitable tax disincentives.
Despite potential obstacles, American philanthropy is remarkably resilient and Americans are inherently generous. Tax policies alone do not dictate charitable behavior.
Advice to Charitable Organizations
Our immediate advice to charitable organizations, and those who support them, is to focus on two simple themes: (1) take advantage of current charitable tax incentives as you plan year-end support; and (2) reaffirm your organization’s mission, purpose, and values and invite your donors to meaningfully embrace these values now.
Donors to charitable organizations should take full advantage of the current federal tax code. Donors did this in 1986 and they should be encouraged to do so again in 2016.
Americans are generous people. They are passionate about many issues – religion, education, healthcare, human service, and arts and culture – and those passions run high following this election.
As we approach the giving season, non-profit organizations should reaffirm the importance of their missions and their relevance in the context of a new era. Extra effort should be made to personally and directly engage donors and challenge them to support the values they cherish and the organizations that contribute so significantly to their communities and world.