How is this new tax bill going to affect us?

It would be hard to tell you how many times I’ve been asked this question in the last month – it’s been a lot!  I thought I should share this blog in hopes it might help.

There has been an incredible amount of hype around the Tax Cuts and Jobs Act of 2017.  Regardless of which side of the issue you look at, the lies, near-lies, and deliberate misrepresentations of what the new changes will do (or not do) is astounding.  This post is not aimed at setting the record straight on everything; instead, I want to focus on just one thing:  charity.  More specifically, charities and the charitable deduction.

It would be naïve to suggest that this law will have zero impact on charity – it will.  However, the degree of that impact varies by charity and, more specifically, how a charity responds to the changes.

The biggest misunderstanding I’ve heard and read about relates to the future of the charitable deduction; the charitable deduction did not change.  Let me say that again: the codes and tables specific to charitable deductions did not change.  (OK, in all fairness, there was a needed change to the quid pro quo codes related to higher education athletics.)  Once you remove the grandstanding and scare tactics, you see that what changed is the requirement around who has to itemize their taxes.  The A = B = F logic is that if a person is not required to itemize their taxes, they won’t care about supporting charity.

Let’s set aside the flashing red light of hypocrisy* in that belief.

Let’s set aside the sickening selfishness of this thought process.

Let’s take a look at the flawed logic.  It suggests that the charity’s donors are stupid.  For simplicity’s sake, let’s say that a charitable donation saves 40% (it’s likely only a fraction of that amount, but…).  This logic suggests that a donor would give you 100 cents to save 40 cents, a net difference (loss) of 60 cents.

Here’s a different way of looking at it: simple 100% deductibility in a 35% tax bracket (a real dream world).
Scenario 1:  A person earned $100, owes $35 in taxes; net of $65.
Scenario 2:  A person earned $100, donated $10, now owes 31.5 ($90 x 35%); net of $58.50.
The donor has $6.50 less in his pocket by donating than he did by simply keeping it and paying the full tax amount.

The moral of the story: the charitable deduction does not save money, but rewards a desirable behavior.

Study after study shows us that donors support their charity out of a moral drive and philosophy.  Basic numbers tell us this logic doesn’t hold up; the estimated number of individual charitable donors is more than five times the number of folks who claimed charitable deductions on their taxes¥.

So then, what’s the big deal?

Setting aside the agenda-laden hype, the big deal is a sense of urgency.  The American society, more than any other, is programmed to be driven by deadlines and goals.  The calendar year and its cut-off for charitable deductions have become a driver.

Of course, charities have become adept at capitalizing upon this.  They plan for it and create entire marketing plans around it.  Charities not only seize the urgency, they leverage it to the hilt by using societal norms to influence behavior.  To be clear, this urgency is built upon the donor’s preexisting desire to support the respective charity’s mission.  The desire to better their world through charitable giving was there, the tax law rewarded the behavior, and the calendar provided a meaningful sense of urgency.

Under the new law, the successful charity will be one that’s able to generate a new sense of urgency (or senses of urgency – or is that supposed to be “sense of urgencies”?).  To drive action today, a charity will have to provide identifiable and emotion-triggering deadlines.  While establishing one deadline is important, I suggest coming up with as many as you can.  You have to overcome the steep learning curve anyway, you might as well capitalize on the experience.  Try different triggers, review the results, adjust, and retest.  It will take some research to find the new normal.  What excites me is that this change allows triggers to be missionally-driven rather than propelled by tax codes and fake deadlines.

Some ideas to try may include: gift matches within a timeframe (your local public radio station has this mastered – listen and learn); specific projects with deadlines (example: $XXX for blankets before the first official day of winter); Kickstarter-esque projects (great for smaller capital needs or program start-ups).  With thought and creativity, any program or service can be paired with new mission-driven triggers to help push the sense of urgency.

So what?

The new tax change is certain to impact the charitable world; just how it will impact it is yet to be determined.  The worst thing you can do is “wait and see”.  I believe there’s opportunity in this change.  With some creativity and out-of-the-box thinking, your mission can benefit from the flux.

What are you going to do to help drive action?



*Hypocrisy?  Yes, hypocrisy.  If an organization says they were raised by God to do God’s work and say that God provides what’s needed, then it’s more than a little hypocritical to say that if the tax code changes, the mission will be hurt.  I won’t speak for them, but my God doesn’t check man’s tax code in the delivery of His perfect will.

Selfish?  Yes, selfish.  An organization, in essence, is saying, “I need you, my loyal donors, to be grossly inconvenienced – tracking paperwork, filing extra forms, etc. – so that you will be inclined to support our mission.”

¥ Data Source:  Giving USA 2017

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