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‘Definitely bad news’: New study finds charitable giving grew a sluggish 1.6% last year

Slow growth seen as early sign that tax code changes hurt philanthropy.

A donation is made into a Salvation Army red kettle in Hallandale, Florida.(Joe Raedle/Getty Images)

Charitable giving in the United States rose a lackluster 1.6 percent last year, despite a strong economy — a sign that the 2018 tax code overhaul could be hurting donations, according to a new study published Monday.

The study by the Fundraising Effectiveness Project also reported a quickening shift away from smaller and middle-class donors in favor of wealthy donors. Money coming from donations under $1,000 fell by more than 4 percent. But gifts from major donors jumped 2.6 percent.

“It’s definitely bad news,” said Steve Taylor, vice president for public policy at United Way Worldwide.

Last year’s changes to the tax code meant that millions of American taxpayers no longer qualified for the charitable tax deduction. Charities warned lawmakers that losing a major driver of giving would hurt. Supporters of the change said economic growth would more than make up for the deduction’s loss.

A study last year by Indiana University predicted the new tax code would cause donations to fall 4.5 percent, off by at least $13 billion. It also said the decline would be concentrated among gifts from the middle of the income scale.

Those predictions appear to be initially supported by the new study — put together by the Association of Fundraising Professionals and the Center on Nonprofits and Philanthropy at the Urban Institute. Donations would normally be expected to grow 3 percent to 5 percent a year, given the country’s rapid economic growth. Charitable giving rising 1.6 percent lags behind that.

The new study also reported that the number of donors fell 4.5 percent last year, indicating a shrinking pool of people involved in philanthropy.

But Shena Ashley, director of the Urban Institute’s nonprofit center, cautioned against drawing concrete conclusions from the new study. It’s difficult to obtain a full picture of what is happening in philanthropy, she said. The Fundraising Effectiveness Project study leans toward covering small and midsize nonprofits. Other studies expected later this year will add to the picture.

“But it does mean there are some clouds in the sky,” Ashley said.

Another recent philanthropy report from Blackbaud, a software company that tracks nonprofit donations, reported a sharp drop in giving in December 2018, compared to the same month in 2017. Donations plummeted 2.3 percent.