Following the passage of the Tax Cuts and Jobs Act of 2017 many speculated that charitable contributions could decline in 2018. While the bill did not do away with the ability of taxpayers to deduct charitable contributions as an itemized deduction it did increase the standard deduction so that millions of taxpayers no longer itemized their tax deductions in 2018. This means that many taxpayers were no longer in a position to benefit from charitable contributions deductions.
Some speculated that the change to the tax law would have little impact on the revenue collected by charities. Many people give to charity for reasons other than tax benefits, so the theory was that the loss of the deduction would not have an impact on donor behavior. In addition, a large percentage of the money donated to charity is contributed by the wealthy who are more likely to continue to itemize their tax deductions. Therefore, the tax deduction is still available to those in the highest tax brackets.
Despite these views the data shows that gifts to charity did decline in 2018 by 1.7%. This could be a result of the change in tax policy or it could be a result of the global stock market decline in 2018. Typically, a stock market decline results in a decline in charitable gifts as the negative wealth effect causes donors to reduce their philanthropic efforts. Therefore, it is too early to conclude that tax policy is the culprit. In addition, the decline in charitable giving was much less than some had predicted possibly proving that tax law has little impact on charitable endeavors.