One of the biggest criticisms on Republican tax plan that passed in late 2017 was that doubling of the standard deduction could lead to a decrease in charitable contributions from middle-class givers, because many people who previously itemized their charitable donations to boost their tax break would no longer be incentivized to do so. That’s proving true.
Overall giving increased by 1.6% between 2017 and 2018, according to a new report from the Fundraising Effectiveness Project, but that boost was driven entirely by the wealthy: people making gifts of $1,000 or more. Gifts of up to $250 and between $250 and $999 dropped about 4% each. The number of total givers dropped at about the same rate, alongside downward trending fluctuations for about every other variable by which nonprofit groups measure their fiscal health and stability. That includes the number of new donors that groups are attracting (it’s down 7%) and the overall donor retention rate–people who give to the same group year-over year–is just 45.5% overall now.
The data is based on a snapshot of the Fundraising Effectiveness Project’s Growth in Giving database, which tracks transaction activity on fundraising platforms including Bloomerang, DonorPerfect, NeonCRM, and SofTrek . In this case, FEP analyzed a subset of 4,500 charities that have consistently raised at least $5,000 from a donor pool of at least 25 people annually for at least six years running.
“I think the most surprising aspect was that giving went up at all,” says Jon Biedermann, cofounder of FEP, who is also a vice president at DonorPerfect, in an email to Fast Company. That’s because the last quarter of 2017 actually spiked, with many people seeming to front-load their giving amid the uncertainty of what might happen with the tax law. In comparing just the fourth quarters of 2017 and 2018, for instance, contributions are actually down in all three gift ranges, including the $1,000-plus category.
His biggest concern is “the rapidly disappearing donor,” he says, noting that a 4% decline in the donor pool represents millions of people who are no longer donating. “That’s millions of people who no longer care to be charitable,” he adds. “With less and less people donating–a trend that has been occurring for more than 10 years–I fear that society’s ‘grand bargain’ between government services and nonprofit social services for those in need is in real danger.”
Rich people giving more money doesn’t pick up the slack from a middle-class decline because the result is less democratic. Fewer people will control the philanthropic purse strings, and give a more narrow perspective of what issues may need funding. That may hurt community-level groups that often play vital roles in places where average people live.
For nonprofits, one takeaway is that it’s more important than ever to work on retaining donors that already give. But as the contributions of major donors become more coveted, Biedermann foresees trouble, “There will be more nonprofits chasing the same pool of donors, while reducing their services to their communities as they can’t keep up with inflation,” he says. “It’s a vicious cycle that I think without changes in tax policy, will be hard to correct.”