Critics argue the Republican tax bill disincentivizes taxpayers from giving to charity, but the jury is still out on that claim.
The crux of the complaint from critics, as argued in The Washington Post and The Los Angeles Times in December, centers around changes Republicans made to the standard deduction — a provision of the tax code that works to ensure all taxpayers are shielded somewhat from federal income tax.
The Republican tax bill President Donald Trump signed into law Friday doubles the standard deduction for single and joint filers. The changes will make filers who currently itemize their deductions switch to using standard deduction and that is a problem because IRS code stipulates that filers can only “deduct charitable contributions if” they “itemize deductions,” critics argue.
Essentially, filers who itemized deductions in previous years will now find it beneficial to use the standard deduction. More filers using the standard deduction will mean less money in the hands of nonprofits, churches and other charitable entities.
The first thing to point out about the critics’ arguments are just how many filers itemize deductions. Roughly 30.1 percent of households itemize, while nearly 70 percent of households take the standard deduction, according to The Tax Foundation.
Furthermore, there is a direct correlation between a household making a higher income and choosing to itemize. Around 93.5 percent of tax returns over $200,000 were itemized in 2013. When a family is making over $200,000 a year, it is hard to argue there isn’t some disposable income for charitable giving.
Another factor to note that stands against the claims that fewer Americans will give to charity is the history of charitable giving in the nation.
Americans give two percent or more of the entire nation’s Gross Domestic Product (GDP) every year to charitable organizations and causes. American individuals and families gave $390.5 billion to charity in 2016, a 4.2 increase from 2015. U.S. corporations and foundations increased their charitable donations 3.5 percent in 2016.
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