ON-Lion Letter

"At 2.2 percent of GDP in 2006, the most recent comparable year, U.S. charitable giving is approximately twice as high as that of the U.K. and roughly fourfold that of Ireland, the next most charitable E.U. country," begins an April report from the Manhattan Institute for Policy Research's Center for State and Local Leadership.  "Yet even as overall wealth has continued to increase in the U.S. (notably, among higher-income households, which are disproportionately likely to make significant charitable donations), overall philanthropic giving has, over the past generation, remained roughly constant as a percentage of economic activity.

"Giving has remained flat even as a variety of rationales have emerged for the need for more such giving:  declining discretionary government spending because of increased fixed costs; concern, in some quarters, over the efficacy of publicly funded social programs; and new social needs in the wake of stagnant wage growth and decreased workforce participation," continues Growing Giving:  American Philanthropy and the Potential of Donor-Advised Funds, by Howard Husock.  "At the same time, a new generation of not-for-profits, led by young social entrepreneurs, is injecting both greater dynamism and stiffer competition for funds into the charity marketplace.

"Given such conditions, the question of whether total U.S. philanthropic giving remains flat, or increases, becomes increasingly pertinent.  One specific, tax-advantaged vehicle for charitable giving, Donor-Advised Funds" (DAFs), according to Husock, "shows signs ... of becoming a means through which net U.S. charitable giving, along with the funds supporting it, might significantly increase."

DAFs allow donors to deposit cash and other assets and avail themselves of a federal tax deduction, for the same tax year, for the full value of their donation.  Once deposited, donations may be used only for charitable purposes and overhead.  Account holders can then, at their discretion, recommend grants from such funds over the remainder of their lifetimes:  hence the name "donor-advised."

Husock's report "examines the potential for further growth in donor-advised funds:  recent DAF growth ... could signal the start of a surge in the volume of total charitable giving, or merely its redirection through a new, more convenient vehicle (rather than, say, cumbersome individual check-writing)." 

Husock is vice president for policy research at the Manhattan Institute, where he also directs its Social Entrepreneurship Initiative

"[O]n balance, DAFs of all kinds," he writes, "provide the preconditions for significant growth in overall U.S. charitable giving.

"Still, DAF growth is not inevitable," he concludes.  "Changes in tax law, such as that proposed in the Tax Reform Act of 2014, could discourage the deposit of funds and assets into ... DAF accounts, curtailing overall U.S. charitable giving in the process."

The Lynde and Harry Bradley Foundation in Milwaukee substantially supports the Manhattan Institute.

Actions: E-mail | Permalink |