Conditions That May Affect the Outlook for Giving

Changes to the variables used in the projection models for charitable giving have the potential to change the outlook for giving.

For definitions of these variables and their sources, see Variable Definitions and Sources in the Guide to the Philanthropy Outlook model at www.PhilanthropyOutlook.com. The Guide to the Philanthropy Outlook also includes information about the stability of the variables.

This section of the report includes additional information about long-term trends and conditions that may affect the outlook for giving.

Income inequality and critiques of philanthropy

Multiple measures of inequality exist. One such measure, the share of income held by the top 10% of families in the United States, has been on the rise for several decades.37 Another study of household wealth found that the share of all wealth held by the top 1% of households grew 9.9% from 1962 to 2013, and 33.0% for the next 4% of households. By 2013, the top 5% of households held 64.9% of all the wealth in the U.S. This trend has continued in recent years—the Gini index, which measures distance between incomes, increased a statistically significant amount in 2018 over 2017.38

There are multiple perspectives about the impact the rise in income inequality might have on charitable giving. One recent study found that giving as a share of income declined for high-income households in periods of high inequality, and increased in periods of low inequality, such as the period following World War II.39 The study controlled for income and a number of other factors, concluding that this trend is more behavioral and psychological in nature. The study suggests areas for future research, including exploring the theory that high-income households have increased “social distance” from the rest of society as inequality increases, which translates into a decreased impetus to give.

Offering a different perspective, one recent critique of philanthropy suggests that income inequality has had a positive effect on the assets of private foundations.40 However, this critique, along with others, raise concerns about the impact that income inequality might have in philanthropy, arguing that mega-donors using private foundations and other philanthropic vehicles have the power to weaken or even circumvent civil society.41

Continued growth in income inequality could have a number of different effects in the coming years, especially if mega-donors shift their giving behaviors, or if the nonprofit community seeks to change policies and regulations internally or at the state and federal level in response to recent critiques.

Upcoming elections and new legislation

Local, state, and national elections will take place in 2020. In general, political donations have not been found to have a negative impact on charitable giving.42 However, a recent study by the Women’s Philanthropy Institute identified changes in giving patterns around the 2016 presidential election: relevant progressive charities received an increase in donations in the days immediately following the election, and that increase was driven by women donors.43 This study raises the question of how donor groups may shift their giving in response to political events.

In 2020 and 2021, donors may respond to policy changes proposed by potential presidential candidates should they be elected. For example, presidential candidates Senator Elizabeth Warren (D-MA) and Bernie Sanders (D-VT) have both proposed a wealth tax.44 There are different ideas about how mega-donors in particular may respond to such a change in policy. Philanthropist John Arnold has suggested that paying higher taxes may be perceived by some mega-donors as a replacement for charitable giving. Others have suggested that mega-donors would have an increased incentive to take advantage of the tax benefits of charitable giving under a wealth tax.45

Regardless, a new wealth-tax would likely create a major incentive for donors to give in the year before the new tax would go into effect.46 The philanthropic world saw a similar situation in December 2017—experts urged nonprofits to notify donors of the tax policy changes and take advantage of the charitable deduction before the Tax Cuts and Jobs Act went into effect.47 In addition, several national donor-advised fund sponsors reported an influx of new accounts in December 2017, which may also have been a response from donors seeking to make a tax-advantaged gift.48

Finally, new legislation may have an impact on charitable giving in the coming years. For instance, several pieces of legislation have proposed a universal charitable deduction as a way for non-itemizing individuals to claim a tax deduction for giving to charity.49 In late 2019, Representative Mark Walker (R-NC) introduced a bill that would allow a universal charitable deduction of $4,000 for individuals and $8,000 for married couples. A universal charitable deduction is expected to have a positive effect on giving to charity.