News and analysis
October 03, 2017

Fewer Americans Find Room in Their Budgets for Charity, Chronicle Data Shows

Fewer Americans are making room in their budgets for charity, and nonprofits are increasingly relying on the affluent for support, according to a new study by The Chronicle of Philanthropy.

Only 24 percent of taxpayers reported on their tax returns that they made a charitable gift in 2015, according to the analysis of Internal Revenue Service data. A decade earlier that figure routinely reached 30 or 31 percent.

With fewer Americans giving to charity, nonprofits are increasingly leaning on the wealthy for support. Three-quarters of all itemized donations in 2015 were from taxpayers who earned $100,000 or more; those earning $200,000 or more accounted for more than half.

Economists caution that the number of people who itemize their taxes and report charitable giving can vary for many reasons; Americans in the past decade have taken fewer deductions of any kind.

But The Chronicle analysis is in line with other studies that indicate that fewer Americans are making donations. Indiana University’s Lilly Family School of Philanthropy estimates that the share of households contributing to charity has dropped from 67 percent in 2004 to 59 percent in 2012, the latest year for which figures are available.

Texas A&M economist Jonathan Meer, who has found a similar drop in giving in his research, says the recession may have broken the habit of giving for some Americans.

"People say to themselves, ‘It turns out that my house isn’t going to appreciate 15 percent every year. I could lose my job that I thought was really steady and safe. And so I’m going to adjust my giving pattern,’ " says Mr. Meer.

Narrowing Support

The decline in itemized giving could accelerate under the tax plan put forward in recent days by the Trump administration and congressional leaders. That plan would roughly double the standard deduction, meaning millions fewer taxpayers would itemize their tax returns. Researchers earlier suggested that Trump tax proposals could reduce charitable giving by $13 billion.

Also, the Trump administration and Congress are weighing significant spending cuts that could affect nonprofits and increase demand for their services at the same time.

Outside the policy world, there are concerns that the data reflect a nonprofit world increasingly divided into haves and have-nots. Rob Meiksins, chief executive of the Nonprofit Center of Milwaukee, says area charities have rebounded since the recession, but many small, community-based organizations continue to struggle, in part because they don’t have the profile or connections to tap into the area’s wealth. "The bigs are going to get theirs, but I don’t know that smaller organizations are seeing a windfall."

United Way Worldwide, which is financed in large part by small donations from average Americans, has seen revenue decline significantly in recent years. The organization for decades raised more money than any other charity nationally, but it was knocked from the top spot last year.

"We’re for sure seeing fewer middle-class Americans with the ability to give," says Brian Gallagher, the organization’s chief executive. "They have way less discretionary income, and charitable giving is the most elastic gift anyone will make; it’s completely driven by discretionary income."

Mr. Gallagher worries that the wealthy, while key contributors to philanthropy, are growing too dominant. "If you don’t have ways for average Americans to be involved" in the work of nonprofits, he says, "it threatens civil society."

Stretched Thin

In San Jose, Calif., taxpayers making $200,000 or more a year account for all but 11 percent of itemized charitable contributions. The middle-class donor is stretched thin by Silicon Valley’s high cost of living, says Kathy Jackson, head of the Second Harvest Food Bank of Santa Clara and San Mateo Counties, in California. "Our impression is that middle-class families who have been the historic bedrock of our giving are struggling," she says. "We’ve seen a diminution of their giving."

Other demographic and cultural shifts may also be contributing to the decline. Millennials have overtaken boomers as the country’s largest generation, and studies widely indicate that they aren’t embracing traditional ideas of giving.

Also, people are increasingly busy and bombarded with information and requests for help. A 2014 report on a YMCA survey concluded America was suffering from "engagement fatigue" when the results showed double-digit declines in both charitable giving and volunteerism since 2010.

$195 Million for Detroit?

The Chronicles How America Gives also illustrates the uneven rates of charitable giving nationwide. In each state, metropolitan area, and county, we analyzed the charitable contributions of taxpayers who made $50,000 or more annually and who itemize their giving. Using the 2015 IRS data, we determined the average percentage of income that taxpayers who itemize their giving donated to charity.

In each state and locality, we also calculated the "giving opportunity" — the dollars that could have been raised if giving rates in each of four income groups had matched their national average.

In 36 of the 100 largest metro areas, each of the four income groups donated to charity at above-average rates, so there was no giving opportunity. Such places include Provo, Utah, where each income group gave at 150 percent of the average rate or better; Atlanta (32 percent or better); and Grand Rapids, Mich. (25 percent or better).

But the other 64 large metro areas all had some giving opportunity. Worcester, Mass., where all of the four income groups were giving below average rates, had the most to gain. Raising the giving rate in that Boston suburb to the benchmark could have boosted charitable contributions from $342 million to $617 million, an 80 percent increase.

More giving by Worcester taxpayers earning $200,000 or more could have made a big difference. In 2015, they donated just 1.8 percent of their income to charity; if they had given 3.3 percent — the national average for that income group in large metro areas — their charitable contributions would have been $274 million, not $151 million.

In some cases, even small increases in giving could have had a big effect. In Detroit, for example, taxpayers who earned $200,000 or more gave 2.8 percent of their income to charity — about $14,000 per individual. Yet if those taxpayers had given 3.3 percent of their income — just another $2,400 per person — charities would have had another $195 million available.

Tyler Davis, Rebecca Koenig, and Brian O’Leary contributed to this report.

Send an e-mail to Drew Lindsay.