Between now and midnight on Dec. 31, Americans are expected to open their wallets to churches and nonprofit organizations during the biggest giving season of the year. Nearly a third of giving occurs in December and over 10 percent during the last three days of the year. For many tax incentives matter, but that’s not the only reason we give. Americans also give for religious, moral and altruistic reasons, all of which support our nonprofit sector.
As a result, America is THE most charitable nation on the planet, giving nearly 1.5 percent of our gross domestic product annually. However, this impressive charitable spirit is under threat from grinches — including Elizabeth Warren and Bernie Sanders — who would reduce and discourage private giving. Measures that discourage giving put at risk work that improve and even save lives and move our society toward greater progress, equality, and prosperity.
Americans gave $428 billion in 2018 to causes as varied as homeless shelters and children’s medical research. This was a 1.1 percent decrease from 2017. If mega gifts from the Bill and Melinda Gates Foundation or million-dollar donations to universities come to mind, you’re missing just how wide-spread private giving is. Individuals comprise the majority of national giving, making 68 percent of all donations. While high-earning households give the most in absolute dollars, poor households give a greater proportion of their incomes.
Religion and religiosity is the most significant factor driving private giving. People who attend two services a month or more give four times as much as those who do not — and not just giving to religious causes but secular ones.
As fewer Americans identify as religious and eschew service attendance, charitable giving will continue to fall. Declines in religious giving already reflect this trend. While these demographic changes are troubling, it is just one challenge that the charitable sector faces. Proposals to impose wealth taxes or limit the charitable deduction are another threat.
The charitable deduction is an important tax incentive that encourages Americans to give. High-income taxpayers are more responsive to changes to the charitable deduction because they are more likely to itemize deductions and face higher tax rates. According to the Tax Policy Center, the 10 percent of households who itemize will provide about 60 percent of charitable giving.
Some lawmakers have proposed limiting the use of the charitable deduction. President Obama proposed a cap on all itemized deductions for high-income households to help fund the Affordable Care Act efforts, an idea that is likely to be resurrected again. Massachusetts Sen. Elizabeth Warren has proposed taxing wealth at $50 million and a 3-percent annual tax on assets in excess of $1 billion. Vermont Sen. Bernie Sanders has a wealth tax plan of his own.
Advocates of reducing deductions for charitable giving imply that it’s only the very wealthy who will be effected and who will carry a bigger burden, but really it’s charities and those they serve will suffer. Taxpayers who are motivated by the tax savings will close their wallets when taxes rise or their ability to claim charitable gifts falls.
There have also been calls for policymakers to limit the charitable deduction only to human service organizations such as soup kitchens and homeless shelters. This is a dangerous slippery slope that would erode the diversity of the charitable sector by starving the educational, medical, cultural, and social causes that enrich our lives and communities.
Some proponents of increased taxes are okay with the flight of private dollars from charitable causes because they believe that government will do a better job with those resources. But this attitude undermines the very spirit of private charitable giving and is unlikely to lead to better outcomes for society.
From our founding, Americans have held a we-can-do approach to solving problems in our communities, country, and worldwide. Rather than waiting for government to fix problems, we unite and get our hands dirty trying to help. We come together to clean up neighborhoods ravished by tornados and at Christmas we chip in to purchase gifts for children whose parents are incarcerated. We give and help in targeted and personalized ways that one-size-fits-none big-government programs simply cannot.
Soaking the rich and draining the charitable sector to fill up government coffers are not effective policy solutions, and Americans should reject those grinches who would starve our nonprofit sector and rob our nation of its unique and admirable charitable spirit.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.