Limitations

The Philanthropy Outlook was developed using well-established econometric methods. The models selected for producing each component of The Philanthropy Outlook are composed of a linear combination of growth rates (or 1-year differences) for key indicators. The results point toward linkages between specific economic variables and philanthropic giving. These linkages can be positive or negative (inverse), as well as direct or indirect. With these results, we cannot say that a particular variable caused philanthropy to rise or fall; rather, they point us toward what is likely to happen and why.

The Philanthropy Outlook is meant to be informational. The Indiana University Lilly Family School of Philanthropy and Marts & Lundy make no guarantees about its accuracy. Similar to other types of predictions, it is impossible to know ahead of time all the factors that will affect giving into the future. While The Philanthropy Outlook is based on scientific methodology, there are limits to the use of such methodology to predict future outcomes.

This year’s edition of The Philanthropy Outlook is also limited by the effects of the Tax Cuts and Jobs Act (TCJA) that are still unfolding. While we have confidence in the measures we have taken to adjust for this policy change (i.e., our data partnership with the University of Pennsylvania Wharton School of Business and the inclusion of key variables directly affected by TCJA in the models), these sweeping reforms represent an out-of-sample change, with possible behavioral effects that are difficult to predict.

For instance, some theorize that the predicted drop in individual giving due to some households losing access to the charitable deduction will not be fully realized until those households have filed their 2018 taxes and determined they are no longer itemizers. This would manifest in the data as the predicted decrease being spread out over 2018 and 2019, instead of being entirely felt in 2018. This is just one example of how the unpredictable impact of the TCJA may affect the accuracy of The Philanthropy Outlook’s predictions.