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What Philanthropy Means in a Polarized World

Senior Vice President (Former)

With 24-hour news cycles, there’s little time to digest what’s happening in our country. Every night, the news offers a dizzying array of scandals and social shifts. It’s hard to keep up.

What’s the law? What are the changes? Have we been this polarized before? And, moreover, how is our polarization playing out in philanthropy?

A Pew Research Center report titled “Political Polarization in the American Public” claimed our political parties have not been this polarized since the Civil War. From Occupy Wall Street to the Tea Party to #metoo, movements for social change are growing, and philanthropy is more and more a social statement. From the ACLU to Planned Parenthood, the Koch brothers to Bloomberg, investors are using philanthropy to drive social change.

The tax cuts have also played a big role in philanthropy. Underlying our “cause” investments is the worry that charitable deductions are disappearing.

Will this continue to disrupt the industry? Last week at a client site, a trustee thought donations were no longer tax deductible. It’s clear we need to sort fact from fiction.

When it comes to the tax cuts and philanthropy, we need to pause. Consider the facts.  The newer tax law largely favors high net worth individuals and corporations, and standard deductions have nearly doubled.

Tax Research and Giving

Experts have weighed in. Our polarization can be seen in reactions to the changes in our tax laws. Some researchers have screamed “the sky is falling,” while others have predicted untold windfalls.

The Lilly Family School of Philanthropy commissioned a study by Independent Sector not too long ago titled “Tax and Policy Charitable Giving Results,” which predicted a loss of between $4.9 billion and $13.1 billion (1.7% to 4.6%) to the philanthropic sector. Many industry insiders predicted that donors who give less than $12,000 annually might stop giving entirely. Yet, in a webinar for nonprofits, Larry Katzenstein, J.D., a partner at Thompson Coburn, claimed more disposable income could result in more donations.

What’s to be believed?

For taxpayers who give less than the standardized deductions, it will be more cost effective to stop itemizing, and this could impact donors who give specifically to lower their taxes. But, for most Americans, this does not align with why we give.

The Why Behind the Gift

Each year, the U.S. Trust® Study of High Net Worth Philanthropy studies our country’s wealthiest households. In the most recent study, the top five reasons why people give were: 1) mission of an organization; 2) their gift makes a difference; 3) personal satisfaction; 4) supporting the same causes annually; and 5) giving back to the community. While tax deductions didn’t make the top five, it’s still important: 52% of respondents say they sometimes consider taxes before making a gift, while nearly 30% never do.

Why It Matters

From 2016 to 2017, philanthropy rose just over 5%, making charitable giving an enterprise of more than $410 billion, representing 2% of our GDP. Any significant changes in how and why people are investing their philanthropic dollars have ramifications. From our social and political climate to taxes and the laws that govern philanthropy, we must understand what is happening and why. We must be prepared for potential budget gaps and needs in the nonprofit sector.

Americans are highly philanthropic because we, as a nation, believe in giving back. Regardless of party affiliation, as a whole, we are more charitable than most nations in the world. Each year, the Charitable Aid Foundation conducts global research on this very issue. Normally, the United States is ranked as the most philanthropic country in the world. Yet, the 2017 study – in which the survey was conducted just prior to the most recent presidential election – revealed the U.S. slipped down to fifth place.

Did we really volunteer less? Did we give less? Or were we distracted?

According to Giving USA’s most recent report on national philanthropy, the U.S.’s charitable contributions have reached historically high levels for the past several years. So, it doesn’t track that we’re giving or volunteering less.

Our priority might not be in answering surveys, but it is still firmly focused on giving and volunteering.  Consciously or subconsciously, we understand that humanity depends on philanthropy.

Making a Difference Together

The academics and economists are busy analyzing facts. But the work of philanthropy is both science and art. It is neither purely analytical nor purely emotional. The art is derived from hope and inspiration. The science deals with the facts and figures of disposable income. How we, as both the donors and fundraisers, deal with ideas and opportunities to serve the greater good is how we collaboratively transform our country through charitable giving.

Let’s consider for a moment: humanity depends on philanthropy.

We are better when we help one another. We are stronger as a nation and better versions of ourselves.

In terms of philanthropy, taxes will always play a role, more for some than others. But taxes, as a whole, are not why people give. Primarily, people give because they want to make a difference. Let’s remember that.

In this time of polarization and uncertainty, let’s find a middle ground steeped in the belief that humanity depends on philanthropy. The sky is not falling. We are the sky. We are the arms that hold up the sky, and, collectively, it is our responsibility to care for and invest in our nation.

This is what makes us great.

I am putting my faith in people who give because they know charity makes a difference. I am putting my faith in the fundraisers who help bridge the gaps. The economics of philanthropy will continue to play out, and regardless of who is in the White House, our belief in helping others remains a core value. Perhaps common ground can be found in this one thing.

I am betting on the art of philanthropy: humanity.

Jennifer Harris, Ph.D., is Senior Vice President, Associations and Social Change Sectors at Graham-Pelton Consulting. Contact her by email or by calling 1800-608-7955.