Republican Tax Bill Will Reduce Charitable Giving

Republican Tax Bill Will Reduce Charitable Giving November 23, 2017

Republicans love to tell us that if the government would just stop providing a social safety net, churches and charities would step in and everything would get better. But a study of the new Republican tax “reform” bill says it will reduce charitable giving by up to $24 billion a year.


The bill doesn’t eliminate the deduction for charitable giving. What it does is double the standard deduction, which will lead to a huge drop in the number of taxpayers itemizing their deductions, which will have the same effect.

Even though the House version of the Tax Cuts and Jobs Act (TCJA) preserves the charitable income tax deduction, other income tax provisions of the bill could reduce charitable giving by between $12 billion and $20 billion in 2018, based on new estimates from the Tax Policy Center. A second provision—repeal of the estate tax—could reduce giving by another $4 billion in the longer run.

By nearly doubling the standard deduction and either repealing or scaling back most itemized deductions, the House version of the TCJA would substantially reduce the number of taxpayers who elect to itemize. TPC estimates that fewer than 13 million taxpayers would itemize deductions in 2018 under the House version of the TCJA, down from more than 46 million under current law.

TPC estimates the House bill would significantly reduce the tax incentive to donate, increasing the after-tax price of giving by about 8 percent. Under current law, the average marginal tax benefit of charitable contributions (for both itemizers and non-itemizers) is about 21 percent. That means that every additional $100 in giving across the population reduces income taxes on average by $21. So the after-tax cost of making the donation is just $79 ($100 – $21). The House bill would cut the tax benefit to about 14 percent, raising the after-tax cost of giving to $86 ($100 – $14).

So if charitable giving is the solution to poverty and other social inequities, and this bill will result in automatic cuts to programs like Medicare that help low-income seniors, for instance, giving less incentive for charitable giving pretty clearly contradicts their own position. It also means more suffering, but that has never seemed to bother Republicans in the slightest. They’re more concerned with fighting fake Christian persecution and the “war on Christmas” than they are with actually solving problems and helping people.

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