How is a Trump presidency likely to impact charitable giving?
November 10, 2016
In the most recent issue of the Chronicle of Philanthropy, authors Megan O'Neil and Timothy Sandoval take a look at the potential impact of Trump's presidency on charitable giving.
by Megan O'Neil and Timothy Sandoval
Donald J. Trump’s stunning victory in the race for the White House, along with the Republican wins in the House and Senate, could lead to serious financial troubles for many nonprofits, experts say. They warn of steep cuts in federal support for nonprofits and a decrease in charitable giving that could persist if his policy proposals are adopted.
Under Mr. Trump’s tax plan, charitable giving would fall in 2017 by at least 4.5 percent and by as much as 9 percent, or by about $13.5 billion to $26.1 billion, according to an analysis by the independent Tax Policy Center released last week. Global financial markets tumbled as results indicated a strong lead for Mr. Trump Tuesday night, and they continued to fall Wednesday morning when he was announced the winner, but they have since stabilized.
If markets don’t rebound strongly, that could negatively affect wealthy donors’ perceptions of their finances, which would hurt giving in 2016’s end-of-year period, said Patrick Rooney, professor of economics and philanthropic studies at Indiana University’s Lilly Family School of Philanthropy. He said it’s hard to tell how long Mr. Trump’s win would have an effect on markets.
"This is basically Brexit but on a much grander scale," Mr. Rooney said.
To many observers, Mr. Trump’s win represents longer-term uncertainly. While campaigning, he called for imposing tariffs on foreign goods and scrapping trade deals. If he takes action on that rhetoric, that could lead to disruptions in the economy that could hurt charitable giving, Mr. Rooney said.
"Candidate Trump said a lot of outrageous things," Mr. Rooney said. "How many of those things does President Trump try to push through?"
Charitable Tax Deductions
Many analysts believe that Mr. Trump and Republican lawmakers will quickly propose a sweeping tax overhaul that would likely include big tax cuts. Some tax proposals from lawmakers will probably also contain limits on charitable-giving incentives and large spending reductions, too, said Steven Taylor, counsel for public policy at United Way Worldwide and a former Congressional aide.
Nonprofits should be calling their elected officials now, reminding them of the importance the charitable deduction plays in financing nonprofit work, Mr. Taylor said. He said some Republicans might warm to the idea of nonprofits playing a larger role in providing services to needy people in light of possible reductions to welfare programs, he said.
But if Congress "made further cuts to social-service spending and at the same time limits incentives for charitable giving, then that would be disastrous," Mr. Taylor said.
Mr. Trump’s tax plan calls for annual reductions of 1 percent in federal spending, excluding the military and entitlement programs like Medicare, which would amount to about $800 billion in cuts over 10 years. If that plan passes, nonprofits that depend on federal funding could face reductions — especially human-service groups, health-care organizations, and colleges, which typically receive substantial government grants and contracts.
Mr. Trump has also proposed substantial tax cuts for wealthy households. In the short-term, those reductions would likely lead to a drop in charitable giving, experts say, because they would diminish the value of charitable tax deductions. Over the long term, it’s difficult to determine what the proposed tax cuts would mean for giving. Some argue that they would put more money in wealthy donors’ pockets, leaving them with more to give. But Mr. Rooney said he’s skeptical that Mr. Trump’s proposals would lead to any surge in giving.
Mr. Trump’s tax plan also calls for capping write offs — including for charitable donations — at $100,000 for single people and $200,000 for married couples.
Sandra Swirski, executive director of Alliance for Charitable Reform, a group that represents grant makers and donors, said she’s heard "good things" from Mr. Trump’s campaign on giving incentives but agrees that nonprofits need to stay vigilant in fighting for chartable deductions. Mr. Trump will offer a "sneak peak" into his views on the matter when he delivers his first his budget in February or March, she said.
With GOP majorities in Congress, Mr. Trump also has good odds of fulfilling his promise to repeal the president’s signature health-care law, known as Obamacare. That might mean millions of people will lose their health insurance — unless Mr. Trump and Republicans replace the law with something that aids the uninsured. If not, hospitals would have to treat more uninsured people, Mr. Rooney said, and other health-care organizations might have to scramble to learn how new polices would affect them.
Nancy Berlin, policy director at the California Association of Nonprofits, said calls to roll back Obamacare worry her because the Golden State made huge investments to implement the law. About 72 percent of the previously uninsured are now covered under the law in California, she said. The state can't pay the bill on its own, and a repeal would possibly hurt the people nonprofits in her state serve.
It remains to be seen if Mr. Trump will continue to champion an end to the "Johnson Amendment," a law that prevents nonprofits from engaging in partisan politics. Mr. Trump has said that the law restricts churches’ and Christian leaders’ free speech by prohibiting them from endorsing political candidates. But eliminating the law might, in effect, allow for tax-deductible political donations to be made to charities, said Roger Colinvaux, a professor at Catholic University of America who specializes in nonprofit tax law. That could lead to mission drift for many charities, he worries, and to a growth in charities with purely political aims.
Republican lawmakers recently introduced a bill that would roll back the Johnson Amendment, which could be a signal it has some support, he said.
Some tax experts wonder whether Mr. Trump’s private foundation will be investigated by Congress. He has been accused of using funds from the charity to benefit his businesses and has allegedly taken credit for charitable donations from the organization even though he has not contributed to it for several years. Ms. Clinton was also accused of giving large foreign donors to the Clinton Foundation access and favors while she was secretary of state.
"I think that if I were a member of Congress, I’d want to know if these questionable practices are widespread throughout the foundation and charity world or not," said Ms. Swirski, of Alliance for Charitable Reform.
Ms. Berlin, of the California Association of Nonprofits, said she’s worried about the optics of having a president who is accused of exaggerating his philanthropy and worries that any investigations into his foundation might cast a shadow over all nonprofits.
In any event, Ms. Berlin suggested that she’s mostly worried the nonprofit world has likely entered a new era — one in which it will be more difficult to collaborate with the federal government.
"We see ourselves as advancing and protecting the public interest of our communities," she said. "I think we have just moved into a time where that is going to be more difficult."