Shifting rules.

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Where Charitable Giving May Head With Trump

Albert R. Hunt is a Bloomberg View columnist. He was the executive editor of Bloomberg News, before which he was a reporter, bureau chief and executive Washington editor at the Wall Street Journal.
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The holidays and year-end tax considerations make this the season of giving. And there are indications Americans will be more generous than ever.

In 2015, Americans donated a record $373.25 billion in charitable contributions, up a little more than 4 percent from the year before, according to Giving USA, the most reliable chronicler of philanthropy.

More than seven in 10 donations were made by individuals, and about 15 percent came from foundations; corporations and bequests accounted for the rest. A little less than a third went to religious entities, with about 15 percent for education. Services for the poor, such as food banks, homeless shelters and legal assistance, got a little less than 12 percent.

Looking beyond this year, there is a divide about where giving is headed, particularly because of recent political changes.

Optimists say that if President-elect Donald Trump makes good on his vow to expand the economy at 4 percent -- doubling the current rate of growth -- the result will be added income and wealth, which translates to more giving. Most independent economic experts doubt he'll achieve that pace.

Giving should also be helped if the Republicans engineer huge tax cuts, primarily for the wealthy -- which is likely -- because the richest are responsible for a growing percentage of charitable contributions. Yet a recession in the next couple years, which historical economic cycles would suggest is likely, would offset any gains.

Moreover, these big tax cuts will also bring significant cutbacks in assistance to the poor, making the need for charitable assistance greater.

Income inequality, not surprisingly, affects giving. The left-leaning Institute for Policy Studies recently issued a recent report entitled "Gilded Giving." Based on reliable data, giving is up considerably among wealthier citizens -- a good thing -- but is declining among average citizens, those making less than $100,000 a year, who give, proportionally, a larger share of the donations to the poor.

"As a society, it's better to have a broad range of stakeholders in giving," argues Chuck Collins, one of the authors of the report. "But the trend also means more money is going to go things like buildings with your name on it and less may go to human services for people in need."

Some changes being envisaged likely would cut donations by wealthy contributors: foremost is the elimination of the estate tax, a long-held goal of Republicans, who shrewdly labeled the levy the "death tax." This is paid by less than one-quarter of 1 percent of the most affluent estates, and applies only to couples worth more than $10.9 million. There's no serious argument that eliminating the estate tax would be an economic boon -- except for affluent heirs -- and it would cost the government $275 billion in revenue over a decade.

But studies by the Congressional Budget Office and Treasury have suggested repeal would cut into charitable giving.

Here's a hypothetical example: A wealthy couple leaves an estate valued at $20 million. Today, they might give $5.45 million, tax free, to their son and daughter and, to avoid taxation, leave $8 million to their church or synagogue, university and local hospital. If there were no estate tax, it's easy to see how they might leave junior and his sister $7 million apiece and give the non-profit $6 million, or a quarter less.

"Repeal will reduce charitable giving, the only issue is how much," says Michael Graetz, a Columbia University law professor, who was assistant Treasury secretary for tax policy in the George H.W. Bush administration and has written a book on the estate tax.

During the campaign, Trump repeatedly promised to repeal a law that prohibits tax-exempt organizations from participating in political activities. This was intended to curry favor with the religious right and, as with many of his promises, it isn't clear whether he intends to follow through.  

If he does make good on this pledge, and if such a move is upheld legally, this could reverse a trend of religious organizations getting a declining share of the charitable pie. But the likely result would be to increase politically directed contributions and activity and not help human services.

However all this unfolds, December, as always, is the biggest giving month, with contributions that are than twice as high as any other month. With a more robust economy and rising stock market, over the next few weeks remember to dig a little deeper in your pocket, especially for the poor.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Albert R. Hunt at ahunt1@bloomberg.net

To contact the editor responsible for this story:
Max Berley at mberley@bloomberg.net