Donations to charity dropped, despite strong economy, follow tax law change

Donations to charity dropped an inflation-adjusted 1.7% in the United States last year, despite a strong economy, according to a new report, highlighting changes to federal tax law and continuing trends in who makes charitable gifts.

The estimated $427.71 billion donated to U.S. charities in 2018 represented a growing share of gifts from foundations and corporations, according to a Giving USA report released Tuesday, which is considered the most comprehensive annual study of philanthropy.

The overall decrease is the first drop in charitable giving in the country since the Great Recession, the organization said.

Corporate donations increased 2.9% last year. Foundation gifts jumped 4.7%. But giving from individuals — the traditional bread-and-butter of American charities — dropped 3.4% last year.

“This was quite a widespread change,” said Una Osili, an economics professor and an associate dean at the Indiana University Lilly Family School of Philanthropy, which helps produce the Giving USA report.

Many charities had warned that individual donations would decline under President Trump’s federal tax overhaul, which took effect last year. The tax plan slashed corporate and some individual tax rates, but it also stopped millions of Americans from qualifying for the charitable tax deduction.

Supporters of the tax changes said increased economic growth would more than make up for the deduction’s loss.

But donations dropped in inflation-adjusted terms last year, and stood essentially flat with a 0.7% rise in real terms — even as the economy continued to grow.

In comparison, charitable donations in 2017 grew 3% in inflation-adjusted terms over the previous year.

Osili said stock market turbulence at the end of 2018 also might have hurt charitable donations.

There was also a change in where the donations flowed in 2018.

Gifts to international affairs groups surged 7%. Environment and animal organizations saw gifts increase 1.2%.

But giving to religious organizations dropped 3.9%. And donations to groups such as United Way — considered a public-society benefit organization — plummeted by 6%.

“There really is no other explanation for these numbers than changes to the tax law,” said Steve Taylor, vice president for public policy at United Way Worldwide.

Taylor said he expects the drop in donations to continue as people continue to change their giving habits in light of new tax law.

“This is just the beginning,” he said.