Despite arguments that it's the most unpopular piece of legislation of the last three decades, the new national tax bill has been signed into law. Immense changes could be coming to the federal tax code, and one economist has spotted a potential problem for nonprofits and donors alike. It's possible that in 2018, charities could lose a cool $21 billion because of these rewrites.
Patrick Rooney, who studies philanthropy at Indiana University-Purdue University Indianapolis, shared his research earlier this month warning that the proposed tax bill could disincentivize both individual and corporate giving. Because of changes coming to the standard deduction and marginal tax rates, Rooney suggests we could see a 4.6 percent drop in household charitable giving next year. "That means the share of filers who get a tax break — a built-in incentive — for their charitable gifts will be falling even further than my team had estimated," he wrote for the Conversation.
Other changes to federal tax laws include raising the so-called "estate tax" threshold, which means wealthy families can give more money to their heirs before it's taxable. That doesn't affect many families, about 500, but it could have a major downstream effect on organizations that rely on large donors and beneficiaries. The biggest problem, however, may simply be that most Americans have less of their own money to donate, whether it's through the loss of tax breaks or reduced income. Rooney proposes some fixes in his op-ed detailing the research, but the actual results of the new policies are all still to be seen.