Most Americans believe eliminating the tax deduction on charitable gifts would reduce giving in the U.S.
In the quest to reduce the budget deficit and the national debt, one possibility that has been raised numerous times is reducing or eliminating deductions for charitable giving.
Survey findings released today from Grey Matter Research (Phoenix, Arizona) show a majority of Americans believe removing the charitable deduction would decrease giving to non-profit organizations. However, among Americans who itemize their deductions, a majority feel their own charitable giving would remain unchanged.
Grey Matter Research surveyed a demographically representative sample of American adults about what they feel would happen if charitable gifts were no longer tax deductible. Only 30% feel there would be no real change in giving in the U.S. Six percent believe charitable donations would actually rise. However, almost two-thirds of Americans say charitable giving in the U.S. would decrease, including 29% who believe it would decrease a little, and 36% who believe it would decrease a lot.
While the issue of reducing or eliminating charitable deductions has become politically charged, it is noteworthy that how Americans feel about the issue does not vary much according to their political party or perspective. Sixty-three percent of Republicans, 68% of independents, and 61% of Democrats believe charitable giving in this country will decrease if contributions are no longer tax deductible. Similarly, this is the perspective among 62% of those who identify themselves as politically conservative, 62% of self-described moderates, and 72% of political liberals. Whether they feel giving will decrease a lot or a little also shows no variation by party or perspective.
Where there is some variation is by age and ethnicity. The older the respondent, the more likely he or she is to believe that cutting the charitable deduction will result in a lot less giving in America. Half of all Americans under age 35 feel giving will decrease, including just 20% who believe it will decrease a lot. The proportion who believe giving will decrease a lot almost doubles among people age 35 to 49 (36%), and rises even more among those 50 to 64 (42%) and those 65 or older (51%). In total, 77% of Americans 65 and older believe giving will decrease nationally if the charitable deduction is eliminated.
African-Americans are also more pessimistic than are others. Forty-five percent of African-American respondents believe charitable giving will decrease a lot if gifts are no longer tax deductible, compared to 36% among Caucasians, 30% among Asian-Americans, and 25% among Latinos.
People who actually donated money to a charitable organization are no more likely than those who gave nothing in the past 12 months to feel giving will decline if these changes are made to the tax code, but bigger givers are a bit more pessimistic. Among Americans who gave $500 or more to non-profit organizations in the last year, 42% feel giving will decline significantly (compared to 33% among those who gave less than $500).
Although the typical American believes giving overall will decline without the charitable deduction, ironically those who itemize their deductions often do not believe their own giving will decline. Eleven percent of the itemizers feel their own household’s giving will decrease a lot if the charitable deduction is eliminated, and another 24% believe their own giving will decrease a little. But 61% feel their own giving will not change, and 5% believe it will actually increase if their gifts are no longer tax deductible. Feelings about this do not vary significantly by household income or amount given.
Ron Sellers, president of Grey Matter Research, noted that (as is often the case) Americans are much more optimistic about their own behavior than they are about the behavior of others. “It’s fascinating that so many people believe their own giving will remain stable even without the deduction, but that other people will give less. Obviously, both perspectives can’t be right for everyone. People are either being unnecessarily pessimistic about what other donors will do, or unreasonably optimistic about their own behavior. Still, this is what Americans truly believe will happen, which needs to be taken into consideration by lawmakers as they discuss these potential changes.”
Even if Americans are more right about their own behavior than about the behavior of others, the fact remains that 35% of Americans who itemize their deductions feel they would give less if the charitable deduction is eliminated.
There are about 12.5 million households in the United States where people typically itemize deductions, make charitable contributions, and believe those contributions will decrease if the charitable deduction is eliminated. On average, these households gave over $2,300 each (self reported) to non-profit organizations in the last year. What’s at risk from these typical Americans is nearly $29 billion annually to the charitable sector. That figure doesn’t even include donations from people who currently do not believe their own giving will decrease, corporate donations, or giving from the very rich, who can give millions of dollars at one time but represent a proportion of the population that is so small that their opinions do not have the ability to impact the data statistically in a nationally representative survey such as this.
Sellers also pointed out that unlike some other recent studies, Grey Matter’s work was not focused on the wealthy, nor on any specific proposals from the White House or members of Congress. “At this moment, President Obama is proposing specific cuts in the charitable deduction for specific income levels, but that’s just the latest proposal. As we’ve seen over and over again, these specifics can change at a moment’s notice. In these financial discussions, there are billions of dollars at stake in potential tax revenues and in charitable donations from the very wealthy. But let’s not forget the additional billions at stake from people who give a thousand dollars, rather than a hundred thousand. Depending on where these discussions end up, those dollars may also be in play now or in the future as the government continues to work on debt reduction. We wanted to get an understanding of how the typical American thinks on this issue, and how the typical American might respond to changes if they were to come about.”
The study was conducted by Grey Matter Research, a market research and consumer insights firm located in Phoenix, Arizona. The sample of 1,011 adults is accurate to within ±3.1 percentage points at the 95 percent confidence level with a 50 percent response distribution.
The study was conducted in all 50 states. Respondents’ age, education, household income, geography, racial/ethnic background, and gender were carefully tracked to ensure appropriate representation and accuracy.