Charitable Giving: Beyond the Tax Breaks

Charitable Giving: Beyond the Tax Breaks

Why do people give money to charity?

The tax advantage argument is often mentioned first, suggesting that people’s hearts aren’t really in it. A broad examination of the issue suggests otherwise: in fact, there are myriad reasons why people determine to share their wealth.

This issue is acute today because certain tax reform provisions essentially reduced the deductions for charitable giving. Will charities be hit by the collateral damage? Historical evidence suggests the answer is ‘no’. While there may be a brief initial downturn in donations, a quick recovery should be expected.

First, the givers adapt. Alterations to the tax code that inhibit donations from one financial source can be offset by strategic changes in the pattern of giving. Our featured author gives an example from the 1980s, when Congress raised the capital gains tax. In response, people started making donations from appreciated assets, rather than other income sources. Expect to see this kind of flexibility in the future.

Other factors are in play, which for some curious reason are often downplayed. For many – likely the majority – of givers, tax breaks are a nice benefit but not the main motivator for giving. People like to build their communities and support constructive goals like education, a cleaner environment or providing job training for the disadvantaged. The motivation comes from the heart, not the pocketbook.

Religious devotion is a strong driving force behind giving. The major religious groups in the US and beyond all encourage giving to the needy and good causes without the expectation of return. These tenets are very much alive in our culture and can be expected to drive continued charitable giving.

For more information, please read:
Philanthropy Is About More Than Just Tax Breaks | Wealth Management

 

Effective Financial Planning Calls for Collaboration The Riskiest Business: Taking Chances with Life Insurance