Charitable giving may slip under federal tax overall
Although it may have been an unintended consequence, the new federal tax overhaul will, in all likelihood, end up meaning fewer dollars going forward will find their way into charities of all types.
That’s because the overhaul doubled the standard tax deduction, which will mean fewer people will itemize on their federal tax returns, meaning fewer people won’t claim philanthropy — charitable giving — on their tax returns. Because about 27 percent of households in the state of Michigan itemize their federal returns, at least some experts are worried.
“Charitable giving incentives are not 100 percent of the solution, but people give more when there are incentives,” Joan Gustafson, external affairs director at the Lansing-based Michigan Nonprofit Association, told the Detroit Free Press for stories published Monday. “When that tax break isn’t available, we’ve seen over and over that the amount people give is less.”
How much less? A lot, as it turns out. The Washington D.C.-based National Tax Policy Center estimates that charitable giving nationally will decline by between $12 billion and $20 billion in 2018, or between 4 percent and 6.5 percent as a result of the increase in the standard deduction and the decrease in the number of taxpayers who itemize their federal taxes, the Free Press reported.
At a time when public budgets at all levels are increasingly stressed, this puts charities and nonprofits under additional pressure.
Regrettably, there are no easy solutions to this problem. For a large number of people — including many in Superiorland — the Great Recession never really ended. People are still struggling, trying to make ends meet.
We hope the political leadership in both parties in Lansing is up to this challenge.