You see what the problem is: Many people who have been itemizing deductions are going to switch to the new standard deduction and so their charitable contributions won't reduce their federal tax.
Is that terrible? But isn't it sort of a scam that we as a group are subsidizing whatever charities various taxpayers happen to like?
WaPo says there will be "new winners and losers" among the charities:
Nonprofits have long noticed that the wealthy are more likely to cut big checks to support museums and universities, while smaller donors tend to give to social-service agencies and religious organizations. Charities fear that this shift could change how the public views donating and alter the priorities of nonprofits.I think religious people will contribute the same to their churches and other organizations. They won't be paying more tax than before. They'll just pay the same whether they give or not, because the erstwhile deduction is less than the standard deduction. They're not penalized. They might conceivably become stingier because they realize that their contribution isn't getting subsidized by other people.
It will help non-tax-exempt organizations, won't it? If you don't expect to itemize deductions, you can give that extra $100 to whatever organization you like. Give without worrying about what the government deems charitable.
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67 comments:
I think you're right. Religious people might take those deductions, if they qualify for them, but they're probably going to continue to support their favorite charities regardless. Wealthier people who have been donating just to reduce their tax liability might stop, and given the nature of the organizations that they tend to donate to, I suspect that's what the left is really worried about.
"I think religious people will contribute the same to their churches and other organizations. They won't be paying more tax than before."
This is indeed one key assumption of a non-profit client I am working with in developing their strategic plan.
Larger individual donors and corporate donors operate under a very different set of assumptions.
Even so, there are steps a non-profit, in particular smaller non-profits, can take to mitigate the risk of that assumption being found incorrect.
I think most people decide what they want to support regardless of the tax angle.
If my taxes go down, I have more money to give away, but I also have more money to buy hot dogs. An increase in the standard deduction that results in lower taxes means that I get to choose what to do with more of my money. I think I'll give more to charity and buy more hot dogs.
Free to choose is the way to go.
I am non religious. I don't give to charities for a tax deduction. I give to such organizations as Salvation Army (never ever to Red Cross), Wounded Warriors, local Humane Society. The tax bill makes no difference to me on this score.
Haha!
If one gives a substantial amount to charities each year, the way to maximize the deductibility is to donate in January and then December of alternate years and take the standard deduction in the other years. Many charities have fiscal years that differ from calendar years so the January/December donations go to different years.
If they're worried about the people who give $100 a year to their local NPR station, I doubt there's much to worry about. Those people never gave enough to qualify for any significant tax break and gave because they thought it was the right thing to do. I suspect they'll continue to do so in future.
Anything that reduces scams like Maurice Stans donating his collection of stuffed African animals (shot on safari) to the Museum of York County (South Carolina) can only be an improvement.
Yeah, it's not really pertinent, but I remember seeing the "collection" years ago, and you could find more interesting, less moth-eaten animals at a Texas roadside attraction.
Humph.
LYNNDH, what is wrong with the Red Cross?
Just because you enter something on schedule A does not mean it has any effect on your total deduction.
The country's innumeracy has been a gimme to accountants and political hacks and the media.
Gosh darn it, there goes my annual contribution to the Clinton Foundation.
Like they were not already...
So the Washington post is admitting most folks WILL benefit fron the tax bill. I thought it was going to destroy the country.
Remember when Bill Clinton donated his used underwear? It wasn't because he was magnanimous. Maybe it was Clinton to whom the WaPoo was referring.
Blogger LYNNDH said...
(never ever to Red Cross)
I learned in boot camp, Navy 1967, from an instructor in an orientation class, that we should never, ever, trust the Red Cross. I don't think he told us why, just that we should avoid them. That was not official Navy doctrine. Officially the Navy loves the Red Cross. Never met individual in my nearly 8 years that had a good opinion of them.
One of the problems with them is that they raise huge amounts of money for one thing, Hurricane Harvey, Superstorm Sandy, are 2 recent examples, then spend it on other things.
Re charitable giving in general, people should not be deducting it anyway. At least Christians should not be:
3-But when thou doest alms let not thy left hand knoweth what thy right hand doeth.
4-That thine alms may be in secret and thy Father which seeth in secret himsoef shall reward the openly.
Matthew 6
John Henry
Blogger Humperdink said...
Remember when Bill Clinton donated his used underwear? It wasn't because he was magnanimous. Maybe it was Clinton to whom the WaPoo was referring.
That was actually Hillary who took the deduction.
You know what the difference between whining and winning is?
There is no H (insert Hillary logo here) in winning.
H/T Ace of Spade, I think.
John Henry
@Mr. Majestyk, you can look up the Red Cross in the Charity Navigator (www.charitynavigator.org), where they only get two stars out of four. They spend less than 90% of what they take in on their programs and services, partly because they pay their CEO and at least three other leaders over a half million dollars a year. Apiece. By contrast my favorite charity, Disabled American Veterans (www.dav.org) spends almost 97% of what it takes in and its leadership is uncompensated. DAV is rated four stars out of four.
The Left considers government to be charity and taxes as charitable contributions so why the crocodile tears for private charities?
I believe the Obama Administration took issue with some charities seeking tax exemption. The Post didn't seem concerned then.
I do not donate to the Red Cross. Among other reasons, I had a bad experience with them many years ago, which I describe in my second book. They are a typical +non-profit, which pays huge salaries and expenses to raise funds.
I donate to the USO and the Sally Anns, because they helped me when I needed them. Payback is not always a bitch.
I have donated to the Red Cross -- I've donated blood, and was foolish enough to give them my phone number. They would probably save themselves thousands of dollars a year to devote to other things if they simply quit spending it on calling me all the time asking for more blood.
The term charity evolved from caritas in Latin, which in ancient times meant love in a broad sense. In its most widely used Christian sense, it signified “love of your fellow human beings.”
From the archives (WaPoo 1993): "A typically extensive document -- which apparently Clinton wrote out in his own hand for the tax return filed for 1986, when he was serving his third term as governor of Arkansas -- is titled "Salvation Army 12/27" and lists items numbered 1 through 17, for which Clinton took a deduction of $555.
Item No. 1 is "Gabardine Suit=Ripped pants -- $75." No. 8 is "Brown Sportscoat -- 100." No. 10 is "6 pr. socks -- 9." And No. 12 is "3 pr. underwear -- 6."
https://www.washingtonpost.com/archive/lifestyle/1993/12/28/bill-clintons-great-skivvies-give-away/0dac853d-cf3d-4faf-8104-bcf124bd93b4/?utm_term=.1235b039d6d8
Hilarious read.
I'm fascinated by how liberals think about taxes. On the one hand, they think that all your money belongs to the government, so if taxes are reduced for "the rich", the rich are ripping off the government. But liberals also think that people have a property right in tax deductions, so they've been robbed if, say, the deduction for state and local taxes is reduced. As for charitable deductions, most folks give what they can afford (and maybe a little bit more) without giving a thought to the effect on their taxes. If some of the ultra-rich have been able to profit from charitable giving under the old tax laws, well isn't that the kind of abuse of the system that we are supposed to condemn?
AFAICT, the WaPo is written by hormonal teenagers. It's all accusations, tears, and slamming doors.
“Re charitable giving in general, people should not be deducting it anyway. At least Christians should not be:
3-But when thou doest alms let not thy left hand knoweth what thy right hand doeth.”
This. Do it because you want to. Expect no gratitude. Better yet, do it anonymously so they can’t even express gratitude. Or waste their money on filling your mailbox with begging letters.
After what the IRS did to Tea Party organizations by slow-walking their 501(c)(3) applications, with nobody in govt, Democrat or Republican giving a dam about it, (actions speak louder than words, GOP), I am less troubled than I might otherwise be by making tax deductibility less important.
@Michael K, you’re an author? Care to post a title?
They're overlooking the AMT. We had almost a decade where our charitable contributions didn't mean anything taxwise because of the AMT. But that didn't factor into our giving.
As they say, reward something and get more of it, punish something and get less of it.
The complexity here is that there are two effects going in opposite directions. Increasing the standard deduction will cause many filers to no longer itemize and therefore lose the tax benefit from the charitable donations. However, it should also increase the amount of money most filers have since their taxes went down, which increases the amount of money that can be donated. Which is going to win out is unknown. My thought is most middle class persons who donate to charity do so because they want to and the deduction is merely a nice bonus.
It is not going to affect my charitable giving, unless the new tax rules cause my taxes to go up and I have less money available. I'm in one of those states that is going to be negatively impacted by the new tax rules and I have not taken the standard deduction in I don't know how long ago.
My alma mater sent out an email telling the recipients how to file our taxes with the old rules and keep the deduction.
The GOP is after higher ed.
chuck said...
AFAICT, the WaPo is written by hormonal teenagers. It's all accusations, tears, and slamming doors.
I love this description of the WaPo (and most journOlist). That is exactly how they act.
All the grief you guys give Chuck you should be fair enough to give props when props are due.
"@Michael K, you’re an author? Care to post a title?"
"War Stories" is one.
"A Brief History of Disease, Science and Medicine" is the other.
The second has been on Amazon about 17 years and still sells a few copies each month.
The nonprofit establishment is no different from the others that Trump has so rightfully and artfully disrupted.
Bill, Republic of Texas said...
chuck said...
AFAICT, the WaPo is written by hormonal teenagers. It's all accusations, tears, and slamming doors.
I love this description of the WaPo (and most journOlist). That is exactly how they act.
All the grief you guys give Chuck you should be fair enough to give props when props are due.
chuck=/=Chuck
Pay attention to the little things. Chuck is the asshole.
Chuck is different from chuck. Which is why chuck/Chuck seems to be bipolar if you don’t notice the difference.
Darrell types faster...
I’m not sure what effect it will have on our charitable giving. Back when we lived in a high tax county and had a large mortgage we would contribute up to the limit where we could no longer claim a deduction and stop. But this year we contributed to three or four hurricane relief funds and a couple others. We contribute because people need help, and now there’s no concern about how much the government lets us deduct because we aren’t itemizing.
Very good point re AMT.
A large proportion of donors get no "benefit" as it is unless the donations are very large, disproportionate to their income.
If your charity only survives through subsidy by the average taxpayer, it probably doesn't deserve to survive. If I had my way the charitable deduction would disappear entirely.
Won't change our charitable giving in the slightest. And I say that as someone who may no longer itemize. If anything, I think it's a plus to no longer worry about valueing our in kind donations. Just give them and hope someone else finds value in them.
I remember this argument being made when top marginal rates were cut from 70% to 50% to 28%. It was wrong then and will be proven wrong again.
As to the AMT, I'm pretty sure it applies to income net of charitable donations, meaning that even if you were hit by it, charitable donations were still deductible.
Wait..so now there's somehow a "right" to deduct donations to a charity?
The article and discussion completely overlooks the fact that while charitable donations have been deductible, the tax benefit never exceeded 100% and the contributor would always have been personally better off by not donating. Charities often try to reflect an imputed benefit through making the world a better place that exceeds the monetary value of the contribution (net of tax savings, of course), and that is at the heart of the con to win contributions as most charities don't achieve their societal goal.
Most charities seem to be run for the benefit of the benefit of the people running the charity as evidence by the extremely high compensation levels often seen in the executive leadership. These people often evolve to see little incentive to serve the actual purpose of the charity but to serve their individual financial goals.
Althouse right again. But Ann’s analysis doesn’t fit The Narrative. That being, of course, that Trump is Evil and must be impeached by any means possible.
If your giving decisions revolve around your bottom line, you aren't doing it right.
The new tax code will eliminate a lot of taxpayers lying about their charitable deductions.
So nice of the Democrats to take time off from strangling 501(c)(3) organizations in the crib to express their concern about the importance of charity!
Won't affect my charitable giving. However, you can still do this:
The IRA Charitable Rollover allows individuals age 70½ and older to make direct transfers totaling up to $100,000 per year to 501(c)(3) charities, without having to count the transfers as income for federal income tax purposes.
The above direct rollover can also count as your Minimum Required Distribution.
The Red Cross started to lose its do-gooder reputation in the Second World War, when it charged soldiers for the coffee and donuts at its canteens. It's been a top-heavy bureaucratic outfit with a target on its back pretty much ever since. Probably for good reason.
There is this theme in the press now, and even as someone who is non-affiliated politically I'm getting tired of it: "Trump and the Republicans disagree with me, and therefore they are racists, homophobes, anti-woman and bad in every possible way."
So when the Republican tax bill doubled the standard deduction, actually a good thing for just about everybody, there was of course a nefarious plot in there somewhere. Think of the old Reagan joke about the boy who sees a barn full of poop and decides, "There must be a pony in there somewhere!"
Trump and the Republicans are not perfect, but not everything they do is uniquely evil. It's as if the reporters and editors view events with a special lens that distorts their vision, a darker version of the rose-colored glasses they wore during the last administration.
Getting a little tired of it.
I give to religious organizations. I've never itemized.
Why I do not give to the Red Cross? I was Red Cross volunteer for over 15 years. At the time I worked for a non-profit so I was more inclined to forgive some of the slip-ups that occur when dealing with a lot of volunteers. Then Katrina hit. I volunteered to be a disaster volunteer and took time off for the training - which consisted of a tape after tape being played with no Red Cross trainer in the room. The well-paid chapter director stopped by to thank us and specifically thanked some friends who had already missed half the training due to getting there late, an extra long lunch, and other breaks. Some "volunteers" made it clear their reason for being there was the free transportation south. Once there their intent was to make money in reconstruction. Then I heard nothing. I kept leaving messages that went unanswered. When I finally got someone on the phone, they screamed at me but didn't answer my question. Calls to the chapter director went unanswered until I went over his head to the local United Way. I got a call the next day with a promise of answers. Weeks later I got a response - they had sent it the wrong address. Not only had I been an active volunteer for THAT CHAPTER for years, but they had required that I fill out a whole new set of forms with my latest information when I volunteered for Katrina. I moved to different chapter where a friend was the volunteer leader. Taught classes for several more years until Red Cross updated their training program requiring additional updates for volunteers. Found out THAT CHAPTER director had not reported all of his CPR trainers to the national organization as trainers so those people had to start over from scratch. He lost over half his trainers in a single day and could not figure out why. Every problem I had or saw as a Red Cross volunteer involved paid staff screwing up and there was no accountability for that taken by the organization on any level.
I give to religious organizations. I've never itemized.
Ive always been a bit dubious of itemized deductions, but was happy (not exactly the correct word when it comes to taxes) to take the deductions I could to minimize the bill. It started to really irk me that the threshold for actually taking deductions continued to rise, especially the past decade. For example, healthcare expenses threshold from 7.5 to 10 percent. And you thought Obama was helping the poor and middle class (why is this number not zero?); the deduction for tax preparation threshold went from zero to some number that I’d never be able to reach.
And then you have so called financial advisors saying that you should keep a mortgage because you can deduct the interest (while also implying a bigger mortgage means a bigger deduction). When doing the math, this simply doesn’t make sense.
What is also an annoyance, is keeping charitable donation receipts; donate because it’s the right thing to do, but one also has a fiscal responsibility to oneself.
It doesn’t reduce your tax burden as much as you think it does. Now, we will see a reduction in taxes, and not need to keep all that paperwork. People will still donate to charity.
I give a lot to the Institute for Justice, which has 4/4 stars on Charity Navigator for 15 straight years, which fewer than 1% of tracked charities have achieved. I will continue to give, deduction or not, to this amazing organization, because they truly are making the world a better place. I'm selfish that way.
Most charity from the lower and middle class wad never itemized in the first place.
Also... Is it bad if people who are poor keep more money while people who are rich give more to charity? If the same amount gets donated the only loser is the government.
Michael K, is Brief History strictly for med students, or is it suitable for a layman? Also, any chance your publisher plans an eBook for it?
As one who prepares many tax returns professionally, I've concluded that people don't contribute to charity because of the tax deduction, but once they give, are very insistent that they get the deduction. It's sort of like correlation does not necessarily mean cause and effect.
Skipper
I agree, over 40 years of doing this it makes no sense in why people donate. People who never have enough deductions to qualify for a Sch A donate a lot. Older folks whose house is paid off, the relatively poor and wealthy religious and families with children who give perfectly good items to places like Goodwill instead of throwing it out.
This new tax plan will be a boon for the "poor" working folks with children, the pro bono tax returns.
Does anyone think the high rollers will stop donating? I think not.
3-But when thou doest alms let not thy left hand knoweth what thy right hand doeth.”
This
My dad told me about the American Red Cross. He was stationed in Europe in the 50s. The British Red Ctoss didn't charge for coffee and donurpts and the ARC did.
I won't contribute after 9/11.
They took in A LOT of money, I think multimillions and they were going to keep 1/3 of it to "upgrade" their phone system, etc.
Just googled it - donations to the Clinton Foundation are tax deductible. WJC will double your donation! New tax law is bad news for the Clinton Foundation. Wonder if Obama has set up something similar?
This is all about what T said when they’d tax those with higher net incomes than those with less. Taking away the State and local Tax deduction does exactly this. Taxes the rich more than the poor who have money to buy a deduction, and ability to vote in higher taxes for everyone, including things like sanctuary cities, higher minimum wages, buying the best benefit of a dollar given to a charity, their 401K, IRAs to insure a better retirement than any of neighbors given SSI and other Pension challenges, even money you’re saving for little Johnny’s college. Something available to everyone of your neighbors, but only they have enough income which is why they have a Mac Mansion, and go on exotic vacations, that your wife would like to go on, but you can’t keep up with those Joneses. So, she’s playing around with John Jones Which makes your dinner discussions hell. No wonder they, at least he voted for T.
CPA perspective here. People in the 15% bracket don't think about a tax break before they give. That's the territory of people in the 39.6(now 37)% bracket. The new law won't change anything.
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