Chicken Little was wrong once again.
Turns out the sky is still up there in the nonprofit fundraising world. The Tax Cuts and Jobs Act of 2017 that many predicted would catastrophically depress charitable giving didn’t happen.
We now know this thanks to the Blackbaud Institute’s recently released 2019 Charitable Giving Report, which provides an annual look at the state of the fundraising industry. Overall, researchers found that charitable giving in the U.S. actually grew 1% in 2019. Over a three-year span, giving is up 5%.
How did the experts get it so wrong, and what lessons can fundraisers learn that will help them respond to the future the world will face in the coming months?
WHAT THE EXPERTS PREDICTED
When the Tax Cuts and Jobs Act (TCJA) was signed into law on Dec. 22, 2017, it altered a variety of aspects in the U.S. tax code. For our purposes, we’ll focus on the impact it had on charities.
To simplify the tax-filing process, the TCJA nearly doubled the standard deduction for both singles and married couples. The law also limited state and local deductions while removing other itemized deductions completely.
Many so-called experts on tax law determined that people would stop donating to the causes dear to them without the incentive of a tax deduction.
Here’s a small sampling of predictions:
- The American Enterprise Institute predicted a 4% drop in donations for 2018.
- Economics professor Patrick Rooney anticipated a $21 billion decline in giving.
- The Tax Policy Center said the law would “discourage charitable giving,” leaving nonprofits to “bear the brunt of these changes.”
WHAT WE REALLY SAW
When nonprofits saw a 2.3% decline in year-end giving in December 2018, many were quick to point to the tax code changes. RKD Group wanted to get to the truth, so we co-commissioned a survey with McQueen Mackin & Associates.
The results were eye-opening. We found that those who gave less reported feeling less connected to the nonprofit. What about the tax law? Crickets.
Turns out the American public has a deeper motivation for giving than simply getting a tax deduction for doing so. People are passionate about the causes that matter to them. They give for emotional, spiritual, and values-oriented reasons.
RKD Group has always believed this, and we said so when the law passed. In our blog post from 2018, we stated without hesitation: “RKD Group believes the tax law will be shown to have had little to no impact whatsoever on mass-market fundraising.”
We also cautioned our clients at the time to avoid major changes in fundraising messaging and strategies to mitigate the law’s feared negative impact.
Turns out we were right. Charitable giving has continued to increase across the U.S., and the changes to the tax code have had little to no impact.
But aren’t there other big potential threats to charitable giving on the horizon?
WHAT TO DO IN 2020
With a contentious 2020 election coming, we’re in the early stages of a highly charged political fundraising season. Once again, nonprofits fear the effects on charitable giving. They want to know if people will stop donating to nonprofits and instead spend on political campaigns.
Forgive me if this seems repetitive, but the sky is not falling.
People are interested in national politics, yes, but they will remain committed to the causes near and dear to them. Consider this: Total spending in all 2016 federal election campaigns was $6.8 billion. That’s less than 2% of the charitable giving total of $390 billion in the U.S. that year.
In fact, the Lilly Family School of Philanthropy at Indiana University just released their projections for donations in 2020. They expect total giving to increase by 4.8% this year.
Our message to nonprofits is simple: You don’t need to change your fundraising strategy because of the election. Continue to focus on building a deep connection with your donors through engaging and relevant messaging.
Ignore the Chicken Littles of the world who fly into a panic every time an acorn falls.
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