Una Osili: It’s time to review how tax policy affects giving

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Una OsiliLast week, author and philanthropist MacKenzie Scott announced a $25 million gift to the United Way of Central Indiana.

Her gift made news as the largest individual donation UWCI has received in its 102-year history. Over the past few months, Scott has donated more than $6 billion to hundreds of charities.

Another recent large gift is a pledge by Jack Dorsey, the CEO of Twitter and Square Inc. His pledge of $1 billion is the largest single, publicly announced donation made to fund COVID-related relief.

While large donations at the million-dollar level capture media attention, the full picture of philanthropic giving is much broader than merely the size of individual monetary contributions—as much of a game-changer as single large gifts can be. In addition to the gifts of time, talent and treasure, testimony—including the use of personal social media—from Americans of all income and cultural backgrounds matters.

In her blog post announcing her gifts, MacKenzie Scott elevated the work of Alycia Kamil. Kamil, a 20-year-old activist and author, organized a community program to fund and deliver groceries and supplies in Chicago.

During this pandemic, we are seeing that more donors are centering their giving on equity and opportunity. Again, Scott’s blog post makes this observation clear.

She notes in her December 2020 post titled “384 Ways to Help”: “This pandemic has been a wrecking ball in the lives of Americans already struggling. … Economic losses and health outcomes alike have been worse for women, for people of color, and people living in poverty.”

Today, there is no shortage of needs and causes to get involved in through numerous grassroots organizations working on social justice and racial equity.

Crowdfunding and other emerging technologies have also gained visibility. The pandemic has inspired innovation with the adoption of new fundraising and virtual-engagement technologies.

Crowdfunding campaigns have expanded in their reach and impact with more than 350 in the United States on GoFundMe that have each raised more than $100,000. The largest—America’s Food Fund—has raised nearly $45 million and is focused on addressing food insecurity.

As a result of our nation’s daunting and complex challenges, policy debates have increasingly focused on strengthening the charitable sector.

With the 2017 tax reforms, U.S. federal tax policy has lowered the tax burden on high-income households without providing the tax recognition for lower- and middle-income families’ generosity. Also, the charitable deduction no longer exists for many of these middle-income filers.

Our experience of the realities of the need during the pandemic and a new administration in Washington provides a fresh opportunity to re-examine the debate on the role of tax policy on charitable giving.

Recently, the Lilly Family School of Philanthropy analyzed the impact of various policy options that would affect the charitable deduction.

Expanding the non-itemizer deduction is estimated to increase both participation rates in charitable giving and charitable dollars raised. We projected that extending the charitable deduction to non-itemizers could increase charitable giving dollars by up to $26.2 billion (an increase of 7.7%) in 2021.

Expanding tax incentives for everyday Americans can be one vital step in fostering public involvement in this critical effort. There is much to be done and much room for all kinds of giving.•

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Osili is professor of economics and associate dean for research and international programs at Indiana University Lilly Family School of Philanthropy. Send comments to ibjedit@ibj.com.


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