Charities took a huge hit from mTrump's 2017 tax bill
Daniel Hungerman, University of Notre Dame
CC BY-ND |
That helps explain why the U.S. tax code encourages giving by offering some donors a tax break. When those taxpayers give, they get a discount on their tax bill through the charitable deduction.
Overall, this deduction lowers tax revenue by tens of billions of dollars every year. To be sure, since giving is socially valuable, the forgone tax dollars might be worth it.
Many taxpayers stopped taking advantage of this tax break after President Donald Trump signed the Tax Cuts and Jobs Act into law in late 2017.
This law greatly increased the standard deduction. As a result, many people stopped itemizing and started using the standard deduction instead because they could pay less in taxes without itemizing that way.
About 30% of taxpayers itemized their tax returns in 2017, making them free to take advantage of the charitable deduction, according to the Internal Revenue Service. But since 2018, only about 10% have been itemizing.
For the 30 million taxpayers who stopped itemizing, the charitable deduction disappeared. They lost an incentive to support many of their favorite causes.
I am an economist who studies charitable activities and public policy. Working with two colleagues, Mark Ottoni-Wilhelm and Xiao Han, I co-authored a study looking at what happened to charitable giving after the Trump-era tax reforms were enacted.