When it comes to the world of philanthropy, 2018 promises to be transformational. Pessimists are concerned about the impact of new federal tax laws, the increase in income inequality, and the growing need for critical social services. Optimists see more reason for hope, believing that we have entered the "golden age of giving."
Watch for these trends in 2018:
"Trickle-down philanthropy" not likely
"Trickle-down economics" is a theory in which reducing taxes on businesses and the wealthy is supposed to stimulate business investment in the short term, benefiting society at large in the long term. It is widely discredited. "Trickle-down philanthropy" is the similar notion that lower taxes for businesses and corporations will lead to more generous giving. It is even less likely.
The new federal income tax law doubles the standardized deduction – to $12,000 for single filers and $24,000 for those filing jointly. This will likely reduce the percentage of taxpayers who itemize deductions from the current 30 percent to only the wealthiest five percent. As a result, giving in 2018 could fall by $20 billion.
The top five percent – those who will still itemize – tend to focus their giving on big institutions like universities and hospitals. They give less to local, social service and safety-net nonprofits. Historically, smaller nonprofits have been supported by middle-class donors -- who no longer have a tax incentive to give.
Plus, the increased estate tax exemption wipes out any tax incentive for all but the wealthiest 1800 Americans to make donations at death. This change is predicted to reduce giving by additional billions.
Trump-inspired giving will sustain
In 2017, there was a surge in politically-motivated "rage philanthropy" across the political spectrum as huge numbers of people gave to organizations that reflected their deepest beliefs.
Both supporters and detractors of President Trump recognize the vital role played by many nonprofits in important issues such as constitutional rights, environmental protection, immigration, healthcare, veterans' issues -- and more. In 2018, Americans will likely continue to use philanthropy as an important and influential form of civic engagement.