February 19, 2019
 
Charitable Giving Expected to Grow 3.4% in 2019, 4.1% in 2020

January 28, 2019 — Although the full impact of the federal tax law changes which took effect last year are still not known, a recently completed study concludes that total annual charitable giving will increase by 3.4% in 2019 and by 4.1% next year.

“A multitude of factors are influencing the prospects for charitable giving in 2019 and 2020, including the macro-economic climate, the potential for the current government shutdown to affect the economy, stock market volatility and donors’ responses to the 2017 tax policy changes,” said Una Osili, an economist who is associate dean for research and international programs at the Lilly Family School of Philanthropy at Indiana University, which produced The Philanthropy Outlook 2019 & 2020, released last week.

“As long as the economy remains strong, Americans should expect to see overall growth in charitable giving in the next two years, driven in part by steady economic growth, particularly growth in personal income. Many other economic indicators that affect giving, including employment and Gross Domestic Product, are positive as well,” Osili added.

Philippe G. Hills, president and CEO of Marts & Lundy, which assisted with the study, noted that "it is still too soon to determine exactly how the recent tax changes may impact future donor decisions, and nonprofits need to be mindful of its potential impact.”

Key findings from the study include the following:
  • Total charitable giving is predicted to grow (3.4 % in 2019 and 4.1% in 2020), rising above the historical 10-year, 25-year, and 40-year annualized average rates of growth.

  • Giving by individuals is predicted to grow (2.1% in 2019 and 3.4% in 2020), but will trail the rate of growth for total giving.

  • Giving by foundations (7.0% in 2019 and 6.1% in 2020) and giving by estates (5.4% in 2019 and 5.6% in 2020) are expected to experience strong growth, outpacing growth rates for total giving in 2019 and 2020.

  • Giving by corporations is also projected to grow (3.2% in 2019 and by 2.6% in 2020), but will lag behind rates of growth for total giving.

  • Strong growth rates are projected for giving to education (3.5% in 2019 and 5.7% in 2020) and giving to health (5.2% in 2019 and 4.4% in 2020). These types of nonprofits have traditionally been associated with high-net-worth giving.

  • Giving to public-society benefit nonprofits (1.3% in 2019 and 4.0% in 2020) will see slower growth than the other two recipient subsectors studied.
The Philanthropy Outlook draws on recent economic forecasts and analyses of the law’s anticipated effects to present projected growth and three potential scenarios that provide context for the baseline projections outlined in the report"
  • Under the Uneven Growth Scenario, estimates for total charitable giving would make much of the regressive effect of the 2017 tax law less apparent. Since high-net-worth individuals/households are already responsible for a large portion of individual/household giving, enough economic growth—even if concentrated almost entirely among the wealthy—would result in growth in individual/household giving. The picture for corporate philanthropy is less clear: strong economic growth may not do enough to offset the decrease in tax incentives for corporate giving, particularly if overall consumer sentiment is weak. Foundation giving would be strong due to the performance of the Standard & Poor’s 500 and GDP.

  • Should the Flat Growth Scenario occur, total giving could stagnate or possibly decline because growth in the market and the economy would flatten by 2020. Individuals/households—still unclear about how to maximize the benefits of giving under the 2017 tax law—may put off making charitable contributions until they are more certain, dampening growth in individual/household philanthropy. Due to S&P 500 and GDP growth realized in previous years, foundation giving would not immediately decline. Corporate giving may increase slightly, although this would largely depend on companies’ reactions to the new corporate tax rates.

  • In the Economic Downturn Scenario, while current economic expansion is expected to continue into 2019, some forecasters expect the positive effects of the 2017 individual and corporate tax cuts to decline rapidly after the first two years, leading to recessionary conditions by the end of 2020. This scenario would result in reductions in charitable giving essentially across the board.

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