GOP Tax Bill

Last year’s tax bill has greatly diminished the incentive for taxpayers to donate to charitable organizations. The number of U.S. taxpayers itemizing deductions could drop from approximately 37 million to 16 million. This could be the most dramatic decline in charitable giving in the modern era.

Which organizations will hurt the most? The greatest change in tax incentives will impact the giving behavior of the middle-class tax bracket, meaning that families earning under $100,000 will probably donate less in the coming years. This demographic overwhelmingly favors donating to local nonprofits, especially religious institutions, such as those that run soup kitchens. That means that religiously grounded basic needs organizations could be in trouble.

Additionally, arts nonprofits will take a hit. Across the board, individual giving to arts and cultural organizations is already down 9.6 percent, and this downward trend is expected to continue over the coming years. Leaders of major cultural institutions—including flagship art museums—may not have much to fear as the major donors that keep them afloat continue to dole out resources, but smaller arts organizations face a dim fundraising forecast. Grassroots funders and mid-level donors will donate to fewer organizations than in previous years, and the nation generally views arts funding as secondary when compared to other causes.

Religious and arts nonprofits can expect an increasingly competitive fundraising climate as organizations vie for diminished resources. Fundraisers should use the same gusto soliciting and stewarding tax-savvy donors that they use with emotionally motivated donors. Properly targeting each distinct donor type creates flexibility, which is necessary for organizations to survive in the changing nonprofit sector; those with it will succeed, and those who lack it will merge or perish.

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