Gloom and doom. Dire and direr. The new tax law will cause donors to stop donating; people to stop putting charities in their estate plans, create new taxes for some 501(c)(3) organizations. Maybe. Or perhaps these threats—things outside of what you do that create risk—will be a benefit as you consider what you need to do differently to mitigate potential catastrophe.
Let’s start with the issue that seems to have most nonprofits wringing their hands: the increase in the standard deduction. Economists estimate that this will reduce the number of Americans who itemize from about 30% to 5%. And if you don’t itemize, you don’t get a charitable gift tax deduction.
But how many of your donors really gave you a gift because they got a tax deduction?
Most studies show that people give because someone asked them. Oh sure, there are other reasons involved—and yes, for some people for some gifts, tax deductions are a consideration—but it starts because someone said, please support this. Donations increase if the person asking can say “please join me.”
Research from The Center for Market and Public Organisation in the UK points out that charitable giving is contagious. “Seeing others give,” according to The Center, “seeing others give makes an individual more likely to give and gentle encouragement from a prominent person in your life can make also make a big difference to your donation decisions – more than quadrupling them in our recent study “ In other words, if I give, I can convince you to give.
If you do a search on “Why people make charitable gifts,” you will get a lot of hits. Random clicking shows that most point that economic benefits to the donor are much less a reason that the current concern over the new tax law would indicate. Mostly people give for personal reasons—reasons of the heart, not the mind.
For example, Network for Good lists 14 reasons people give, and note what leads the list:
- Someone I know asked me to give, and I wanted to help them
- I felt emotionally moved by someone’s story
- I want to feel I’m not powerless in the face of need and can help (this is especially true during disasters)
- I want to feel I’m changing someone’s life
- I feel a sense of closeness to a community or group
- I want to memorialize someone (who is struggling or died of a disease, for example)
- I was raised to give to charity—it’s tradition in my family
- I want to be “hip,” and supporting this charity (i.e., wearing a yellow wrist band) is in style
- It makes me feel connected to other people and builds my social network
- I want to have a good image for myself/my company
- I want to leave a legacy that perpetuates me, my ideals or my cause
- I feel fortunate and want to give something back to others
- I give for religious reasons—my faith teaches me to help others
- I want to be seen as a leader/role model
Most importantly, according to many studies, giving makes us happy
As we said, none of these reasons have to do with taxes. That is not to say that taxes don’t matter; they sometimes do. But most who give to get a charitable deduction, will be among the 5% that will continue to itemize. For the rest of your donors, it is your job to reach out, ask them to give and provide the right reason for them.