3 unsettling reasons Americans are giving less cash to charity

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After a record-breaking 2017, charitable giving by individual Americans fell last year in response to a volatile stock market and the new tax law.

Charities raked in $427.71 billion overall in 2018, an increase in total dollars from the previous year. But when adjusted for inflation, the figure represented a 1.7% decline in overall giving, according to Giving USA, an annual report on philanthropy released Tuesday.

The dollar amount of donations from individual Americans dropped 1.1%, while donations from corporations and foundations – the charitable entities often established by wealthy families – increased by 5.4% and 7.3% respectively.

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“The economy is a well-established factor in the growth of giving year-over-year and that was certainly the case in 2018,” said Una Osili, Ph.D., associate dean for research and international programs at the Lilly Family School of Philanthropy, which researches and writes the Giving USA report. “As a countervailing factor, the stock market declined in late 2018, which may have had a dampening effect on giving.”

1. A volatile stock market has rattled investors’ nerves

Osili said the robust economy saw a 5% gain in personal disposable income and a 5.2% increase in GDP. Meanwhile, the Dow Jones Industrial Average and S&P 500 Index fell by double-digit percentages in late 2018 and then rebounded.

2. People are more concerned about their tax returns

Another factor that’s affecting charitable giving: President Trump’s tax reform, Osili said. The Tax Cuts and Jobs Act doubled the standard deduction for taxpayers. Nonprofits feared this would eliminate the incentive for people to itemize deductions and make them less likely to make charitable donations, which are typically itemized.

More than 45 million households itemized deductions in 2016, according to Giving USA. That number may have dropped to approximately 16 to 20 million households in 2018, the report said. Some nonprofit leaders feared fewer itemizers could lead to a $13 to $20 billion drop in donations.

While those dire predictions haven’t materialized yet, experts say it’s still too early to tell exactly how the new tax law has affected charitable giving.

3. Religion and education are upstaged by climate change

Americans are less concerned about the afterlife – and more concerned about the end of the world. “Religious organizations received the largest share of charitable dollars in 2018, with 29% of total giving,” the report said. “This is the first time that giving to religion has fallen below 30% of overall giving.”

While giving to religious groups and education declined, there were significant increases, on a percentage basis, in donations to environmental causes and international affairs. That could be a reflection of media attention to issues like climate change and immigration.

Indeed, news stories about children detained at the U.S.-Mexico border in the summer of 2018 helped fuel a record-breaking fundraiser on Facebook for a nonprofit working to help migrant families.

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