Philanthropy lobbyists argue: Doubling the standard deduction would cut charitable donations. Is it true?
We think that Americans are charitable, very charitable, in fact. Not everyone agrees. Paradoxically enough, it is the charities themselves that are most concerned, at least if we are to believe their trade groups, both liberal and conservative. The Wall Street Journal reports that they fear a seemingly wonderful provision in the proposed tax reform. We refer to the idea to raise or even double the standard deduction for a married couple to $24,400. What could be bad about that?
Here is the logic, such as it is, of the charities. Itemized donations to charities are tax deductible. A higher standard deduction is a disincentive to itemize one’s charitable contributions. Ergo, Americans will give less charity if the standard deduction is raised significantly.
Leave aside the technical question as to whether the percentage of married couples in the population continues to drop. Is it really true that people give charity primarily to get a tax deduction? We cannot know for certain unless the standard deduction is doubled and the subsequent sum of charitable donations is measured against the current sum. We can know many other things now:
• the wealthy receive no tax break for their charitable deductions. Judging by the seemingly endless examples of truly enormous donations, such as endowed buildings at hospitals, museums, universities, and religious institutions; and endowed academic chairs and scholarship programs ranging from the seven to nine figures, charities have nothing to worry about.
• smaller donors might give less if they receive a smaller tax benefit, but how much less? Probably the amount of the tax benefit they now enjoy. Not a big difference there.
• charitable donations are typically correlated with the state of the economy. Judging by the performance of the stock market, we would foresee an increase, not a decrease, in charitable donations, even if the standard deduction doubled.
• this country has developed a culture of giving. We consider it natural when our government sends financial aid to foreign countries suffering from a natural disaster. We expect public-private partnerships to address many issues. We reward giving with public recognition in a seemingly endless stream of high profile charity dinners and other events. We witness charities competing to outdo each other in creatively galvanizing and rewarding givers.
We are not worried about charitable giving in America.
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