During the debate on tax reform, some listeners expressed their concern that the charitable deduction would be eliminated. Even after the bill was passed, one listener lamented that charitable deductions were dropped. None of that is true, but I kept wondering why people would believe this.
Apparently some of the spokespeople for philanthropy expressed their concern that the tax bill would reduce the incentive for giving because it nearly doubled the standard deduction. That would mean few filers (at least in the middle class) would be itemizing their deductions. So they argued that these taxpayers would be less inclined to donate to various charities.
While that may be true, it isn’t true that the charitable deduction was dropped from the tax code. And you have to wonder whether increasing the standard deduction will hurt charities that much. The assumption is that one of the reasons people give is for the tax deduction.
First, I would hope that most Christians give to churches and Christian organizations because they believe in the ministry that is taking place. A tax deduction is nice, but probably not the major reason for a gift.
Some counter that an increased number of donations are given in December so that means Christians are giving for tax reasons. That may be true, but it may also be true that deadlines encourage giving. Many ministries receive significant donations in June before a ministry finishes its fiscal year (often ending on June 30). There is no tax advantage then, but the deadline still stimulates significant donations.
Second, if the tax reform bill increases individual family income, Americans will have more money they can donate to charities. Think of the number of American companies that have already given $1000 bonuses to their employees or plan to do so soon.
I believe charities will do well in 2018 even if they have to work a little harder to encourage already generous Americans to continue giving.