(Virginia Pilot) On the heels of a decade of unprecedented growth, we celebrate the year 2018 for what it was - a complex year with incredible generosity.
There will be other headlines, additional analysis and lots of discussion about what this year meant and could mean for philanthropy in this country. In a few sentences, I will share some thoughts and insights regarding the impact of the economy and the Tax Cuts and Jobs Act.
But, before you read one sentence more, we need to celebrate the fact Americans contributed over $427 billion in 2018, according to Giving USA's 2019: The Annual Report on Philanthropy for the Year 2018, released June 18.
The big picture is that Americans are generous, and giving remains strong but was essentially flat compared to the record-setting year of 2017.
WHAT MADE YEAR SO COMPLEX?
• Tax Cut & Jobs Act (TCJA): This has been the elephant in the room for the last year. In all honesty, the verdict is still out regarding the actual and long-term impact of this tax code, and it will more than likely be another two years before we can begin to understand the ramifications of this policy.
In looking at 2018, the act had a complex impact. For high-net-worth donors, the increase in the maximum charitable deduction increased the incentive to give. For most Americans, the increase in the standard deduction reduced the tax incentive for charitable giving.
More than 45 million households itemized deductions in 2016. Numerous studies suggest that number may have dropped to approximately 16 to 20 million households in 2018.
• Competing economic factors: For example, many of the economic variables that shape giving, such as GDP and disposable personal income, had relatively strong growth in 2018. However, the stock market decline of almost 14% in the last quarter of 2018 (commonly called “the giving quarter”) had a dampening effect.
WHO'S GIVING AND WHERE IS IT GOING?
Giving by individuals decreased as a percentage of total giving in 2018 to 68% (down from 70% in 2017). Despite the decrease in percentage points, individual giving achieved its third-highest total dollar amount on record, adjusted for inflation. The money contributed reinforces that those Americans making charitable contributions still value philanthropy and are giving larger gifts to support the work of the nonprofit sector.
• Grant-making by foundations and corporations both increased year over year. Grants from foundations jumped 7.3 percent to a record $75.86 billion, and corporations increased by 5.4%. While we should recognize the growth and acknowledge both sectors play an important role in supporting the work of nonprofits, I want to reiterate it is individual donors that drive giving in this country.
In total, individuals contribute over 85% of dollars given (including individuals, bequests and private family foundations).
• The nine primary charitable sectors saw uneven growth. Further elucidating the complexity of the year, two increased, three remained relatively flat and four declined year over year.
• Giving to education and foundations both saw a decline in 2018; however, both of these sectors experienced strong growth in 2017, even when adjusted for inflation. It is not unusual for strong growth in giving one year to be followed by slower growth or a decline in the following year, especially in terms of inflation-adjusted dollars.
• Giving to the public-society benefit subsector, which includes United Ways and donor-advised funds, decreased in 2018 after eight years of consecutive growth. Similarly, giving to religion declined in 2018 after six years of slow growth and one year of flat growth in inflation-adjusted dollars in 2017.
• Giving to human services, health, and arts, culture and humanities organizations stayed relatively flat in 2018 in current dollars and did not keep pace with inflation.
• International affairs and environment and animal organizations were the two types of recipient organizations that experienced substantial growth in giving in 2018.
With so many factors influencing and affecting charitable giving in this country, it will be easy to spin the story. I have already seen contradictory headlines using different figures from the report: “Charitable Giving up 0.7 Percent in 2018” and “Gifts to Charity Dropped 1.7 Percent Last Year” (both percentage figures are accurate where one uses current dollars and the other inflation-adjusted dollars).
Buzz words such as warning signs, stalled giving and trouble ahead are being tossed around. I want to caution each of us not to get wrapped up in the hype. Yes, giving is affected by tax policy, the economy, public policy and other factors, but, for most Americans, these are not the only reasons they give.
Americans give to nonprofits because they believe in the power of philanthropy and are generous. Let’s use that as our headline to continue to spread the word about the importance of philanthropy.