WASHINGTON – Current tax reform proposals in Washington would decrease religious giving by an estimated 4.7 percent, according to new research commissioned by Independent Sector and conducted by the Indiana University Lilly Family School of Philanthropy. Faith-based organizations would see a slightly larger decline than other organizations (-4.4 percent), and overall charitable giving would drop by an estimated $13 billion.
The study also found that when tax reform proposals include a “universal” charitable deduction for all taxpayers, including those who do not currently itemize on their taxes, charitable giving actually increased by an estimated $4.6 billion. In looking at panel data on giving, researchers found that households gaining itemization status gave more money across the board, but the greatest share of that increase went to religious organizations ($81) versus other charities ($45).
“Americans are very generous, and research shows that religious Americans are even more generous than the average,” said Brian W. Walsh, executive director of the Faith & Giving Coalition. “However, this study demonstrates the major negative impact the leading tax reform proposal could have on America’s congregations and ministries to the poor and needy, which are already stretched to their limits.”
Research has consistently shown that people do give more when they are incentivized to do so through the tax code, and people of faith are no exception. According to the National Center for Charitable Statistics, about 45 percent of all giving in the United States goes to religious organizations.
The new study used the 2014 Tax Reform Act introduced by then House Ways and Means Committee Chairman Dave Camp (R-MI) to estimate the potential effects of tax policies on charitable giving. In reducing the top marginal tax rate and increasing the standard deduction, tax proposals released recently by the Trump Administration and congressional Republicans closely mirror the Camp plan.
Independent Sector anticipated that such an overhaul of the tax code could mean significant decreases in charitable giving. The Indiana University study was an attempt to quantify how changes in tax policy might affect giving to all institutions, including houses of worship.
“The expanded charitable deduction helps to soften the blow that tax reform may deal to congregations and charities,” said Daniel J. Cardinali, president and CEO of Independent Sector. “We look forward to bringing all areas of the charitable sector together to call on Congress and the Administration to make the best decision for our communities.”
Learn more about Independent Sector’s public policy work at independentsector.org/policy and about the universal deduction at Giving100.org. Learn more about the Lilly Family School of Philanthropy’s research at philanthropy.iupui.edu/research. Independent Sector thanks Leadership 18 for supporting this work.
About Independent Sector
Independent Sector is the only national membership organization that brings together a diverse set of nonprofits, foundations, and corporations to advance the common good. Learn more at independentsector.org.
About Lilly Family School of Philanthropy
The Indiana University Lilly Family School of Philanthropy is dedicated to improving philanthropy to improve the world by training and empowering students and professionals to be innovators and leaders who create positive and lasting change in the world. The school offers a comprehensive approach to philanthropy through its academic, research, and international programs, and through The Fund Raising School, Lake Institute on Faith & Giving, and the Women’s Philanthropy Institute.