Even with all the talk about philanthropy in the presidential election, we know precious little about what President Trump will do when it comes to policies on charitable giving and government role in encouraging it.
The campaign itself, however, does provide some lessons for people at charities and foundations.
First, the idea that elected or appointed officials can establish their own operating foundations and seek outside support for them will certainly become suspect, thanks to the suspicion surrounding the Clinton Foundation. The Clintons have not been the only ones to establish such foundations — but may be the ones who discredit the concept. Certainly, the Clintons themselves will struggle if they try to rebuild the Clinton Foundation, absent the lure of potential political influence — and in light of Ms. Clinton’s own promises to narrow its scope had she been elected.
Suspicion of government entanglement with philanthropy could even extend further. One wonders, for example, how a Trump administration will handle the precedent of the Obama administration’s My Brother’s Keeper project — which, in the name of the high-minded social goal of helping adolescent black males, invites private corporate support. Might Mr. Trump see no harm in such mingling even if it opens a backdoor to those seeking to curry favor, including corporate philanthropists?
Perhaps more important to all donors, however, will be the likely overhaul of the federal tax code.
Both Mr. Trump and House Speaker Paul Ryan have released relatively detailed tax plans with implications for philanthropy. Mr. Trump, notably, would cap all tax deductions at $100,000 for individuals and $200,000 for couples, while the House plan would eliminate all tax deductions, except the charitable and mortgage-interest deductions.
Should the current Trump version become law, there’s good reason to believe that — absent the overall surge in wealth predicted by the candidate — charitable giving could decline. A $200,000 deduction cap may seem generous, but wealthy households in high-tax blue states can reach that figure fairly easily through a combination of state income and sales taxes and local property taxes. (I serve on a local tax board in New York, for example, where many individual property-tax bills alone top $100,000).
The incoming president has philanthropy pondering the big changes that lie ahead in the new administration and what they mean for fundraising, tax policy, spending, immigration, regulation, advocacy efforts, and more.
In my study “Tax Reform and the Charitable Deduction: The Risk to Blue State Philanthropy,” I noted that “any tax-law change that limited overall deductibility, for instance, would matter far more in high-tax jurisdictions — and would, by extension, likely matter more for those institutions in such jurisdictions that rely on charitable support. Notably, of the 4.5 million high-net-worth itemizers in the United States, 708,000 are in California and 386,000 are in New York — both states in which major national charitable nonprofits are located.” High-income taxpayers have historically donated more in states where tax incentives for charity are larger, so will they likely donate less if those incentives decrease.”
Again, such assumptions may be upended if the U.S. were, indeed, to see a period of more robust economic growth and greater household wealth. Not all charitable giving is motivated by the tax code, after all.
For the first time since 1986, the stars are aligned for a serious Congressional run at revamping the tax code. Those with an interest in philanthropy and the reasons for a change in the tax code should pay close attention.
Howard Husock is vice president for research and publications at the Manhattan Institute and a regular Chronicle contributor.
