December is the month for charity. A full 40 percent of charitable giving is made as the year comes to a close. At the same time, the numbers from 2018 show that donations declined in the first year of the Tax Cut and Jobs Act — a time of record job growth and a bullish stock market.
So if the economic signs were generally good, what happened to charity? And how are Jewish nonprofits affected — synagogues, schools, federations and other organizations?
The numbers show this about nonprofits: They really do need you.
According to Giving USA’s 2018 Annual Report on Philanthropy, total donations declined 1.7 percent in 2018, reaching $427.7 billion, a drop from 2017’s all-time high of $435.1 billion.
Before 2017, the amount of total giving had been on the rise for four years. Total giving includes charitable donations from large companies and organizations; but the drop in giving did not come from companies and organizations giving less.
The tax law, which went into effect at the beginning of 2018, suspended the personal exemption and nearly doubled the standard amount taxpayers need to file before they’re allowed to deduct the charitable giving from their taxes. Individuals now must donate $12,000 and couples must donate $24,000 before they’re allowed to deduct.
In 2018, individual giving, by individuals or households, dropped 3.4 percent (adjusted for inflation) to $292.09 billion. It’s that drop that has experts worried for the future of smaller charities and nonprofits, as they rely on individuals, not companies, for their donations.
The good news is that this drop was not as much as experts had predicted, said Hanna Shaul Bar Nissim, an expert on American Jewish philanthropy at Brandeis University.
She believes that part of what encouraged people to give are their values. And many Americans didn’t care that they would no longer benefit from tax deductions for charitable giving.
“There’s more factors at play [than the tax law]. Giving during holidays, it’s embedded in our society [for] Jews, Christians and Muslims,” she said.
The economy also has played a role in the change in giving. The Washington Post reported that before the Great Recession began in 2007, nearly two-thirds of American households gave to charity. Now only 55 percent give.
Melissa Brown, of the Nonprofit Research Collaborative, told WJW, “Giving is a very
complex behavior. Lots of it depends on people’s sense of financial security. Some donors [will] change any spending that they can control. And often, charitable giving is one of the first things to go.”
Causes people are donating to
There will always be certain causes people give to: medical research, animals, youth and disaster relief. In 2018, the most popular causes were environmental and international issues.
Giving to environmental causes went up by 1.2 percent. Giving to international causes went up 7 percent, according to Giving USA.
However, donations toward education and religious-related causes went down. This could spell trouble for synagogues. A 2017 report from Giving USA said that while Jews are “more generous than households of other faiths in total giving,” only about 35 percent of Jewish giving goes toward religious causes.
There are a lot of factors that come into play when people are deciding where to give, and it’s possible that fewer Jews joining synagogues is related to the low amount of Jewish religious giving.
Charitable giving, or tzedakah, has always been a big part of Judaism. But these donations aren’t always directed toward Jewish causes: They could just be donations to a hospital or women’s shelter.
Many view giving as an inherent part of their Judaism, Bar Nissim said. But many young Jews are disconnected from the Jewish community.
“They don’t necessarily associate Judaism with activism,” she said.
Even though giving toward religious organizations has dropped by nearly 4 percent (when adjusted for inflation), Bar Nissim isn’t worried.
“When people give to the [Jewish] federation, they don’t give to the Jewish faith. They give to the Jewish community. How much we give to religious and nonreligious causes is obvious to people within our community, but not people outside it,” she said. Because Judaism is both a faith and ethnicity, giving to Jewish causes doesn’t necessarily mean giving to religious ones.
“Giving is very important in the Jewish community,” Bar Nissim said. “We have to be very, very critical” about reports like Giving USA’s.
They don’t always take the nuances of Jewish culture into account.
These days, people are being more selective about the charities they give to, said Patrick Rooney, professor of economics and philanthropic studies at Indiana University.
Wealthier people are also more likely to give mega gifts to a select few, usually name-brand, charities like the Red Cross, the Salvation Army, St. Jude’s and Goodwill.
Middle-class households, which are more likely to give to local charities like their city’s soup kitchen or homeless shelter, have been giving less.
Rooney said this spells trouble for those local nonprofits. And it’s exacerbated by the trust dilemma.
“People in this era have a really hard time trusting institutions,” Brown said. “Larger groups can make claims. They have the infrastructure to actually capture information about their progress. Smaller charities are usually relying on big hearts, so they get caught in a cycle. They don’t have the capacity to report their results [so] they can’t gain trust.”
In 2018, the top 100 non-profit organizations in the country — the “brand name” charities — received 11 percent of all charitable donations, according to Non Profit Source.
How are people donating differently?
In order to still take advantage of tax benefits people have turned to “bunching” their charitable gifts, Rooney explained. This means that they only give every other year, or every third year, but end up giving more than if they were giving every year.
This way of donating allows them to reach the increased threshold and still be able to donate to their preferred charities. However, these donations can be unpredictable to the charities.
People might change which charities they’re focusing on every time they donate, and
organizations that rely on regular contributions might not get those few big donations they rely on to get through the fiscal year.
And the regular donors probably won’t inform charities when they’re donating, so charities can’t accurately predict their budget for the upcoming year, Rooney said.
“More volatile giving means [there’s] more difficulty in planning and budgeting especially for small charities,” Rooney said. “It’s more efficient to give a fewer number of gifts and make them larger than to give many gifts that are small.”
Younger people — millennials and Gen Z — prefer to give directly through sites like GoFundMe or to individuals, as opposed to organizations, according to Giving USA’s report.
Bar Nissim pointed out that the “notion of philanthropy” is very different for younger people. Those under 25 are more likely to use the internet as a big part of how they approach charitable giving.
“They control and sustain charitable activities within that space. The traditional structures [of philanthropy] are not relevant to them. Their philanthropy is part of technology; [it] dictates how they give,” she said, adding that many charities haven’t taken that into consideration yet.
“The internet is crucial. It impacts [the] ways you’re engaged in social issues: Things that are obvious to [young people] aren’t obvious to me. We might make the same donation, but the road that leads us there is different and all the mechanisms around fundraising have to adapt.”
The implications for these charitable behavior differences could have a huge
impact on Jewish organizations.
The best way of giving
Those interviewed for this story said that money isn’t the only measure of
philanthropy. People can also donate their time or expertise to help solve issues.
But for those still looking to donate cash, there are more effective ways of donating under the new tax laws. There is the option to put one’s money into a donor-advised fund. The person overseeing the fund can help decide how much and which charities to give to.
Brown advised people with retirement accounts to make “tax advantage gifts through required minimum distribution,” which basically means asking for the cash from the account to be donated directly to charity rather than to oneself. This means they can avoid paying taxes on the gift.
Potential donors can also pool their donations with others and decide as a group which causes to donate to, she said.
This can make a larger impact than donating on one’s own. The group can choose a different charity each time, or focus on a particular cause that is affecting them all.
Rooney advises people to be “more strategic” in how they give. “Perhaps add more zeros to a smaller number of charities,” he said. “[Charities] should encourage people to continue giving. It’s more efficient to give a fewer number of gifts [and] it’s better for the donor and the charity.”
But no matter how somebody decides to give, Rooney and the others say, the act of giving is more important than any kind of benefits the donor might receive.
“Giving has never been about the tax benefit. Either through tzedakah, chesed or social justice, there’s always something that motivates people to give,” Brown said.
“All charities have to do is tap into that motivation. Nor is giving something restrained by income. I could dig behind my couch cushions and find enough [money] that would make a difference.”