(Illustration: Stephan Schmitz)
One consequence of the Tax Cuts and Jobs Act of 2017 has been its effect on charitable giving, according to Law School Professor Ray Madoff. Among other things, the law nearly doubled the size of the standard federal tax deduction, a change that Madoff recently told me has resulted in fewer people having a financial incentive to give to charity.
Since the Tax Cuts and Jobs Act was signed into law by President Trump, Madoff said, the participation rate in charitable giving among people taking the standard deduction has dropped from 25 percent to 8.5 percent. “What this means is not only is it likely that fewer dollars are going to charity, but—even more important—charities are going to be forced to direct their work to the interests of the wealthiest Americans because those are the people that are most likely to give them money,” said Madoff, an expert in philanthropy policy, taxes, and estate planning. “We’re moving toward a world that’s even more oriented to the interests of the wealthy than it is now.”
Madoff and Roger Colinvaux, a professor at the Catholic University of America’s Columbus School of Law, recently published a paper proposing reforms to the tax laws governing donations to charities. The paper specifically raises concerns about the growing use of donor-advised funds, or DAFs, described as “financial accounts legally held by a public charity sponsor, but effectively controlled by donors.” Donors receive tax benefits for gifts to DAFs, the authors write, “yet funds held in DAFs are not truly available for charitable use until the donors release their advisory privilege.”
Madoff has been in touch with congressional staffers about the possibility of testifying before lawmakers in support of the reforms outlined in the paper. The goal, she stressed, is a tax system that incentivizes more people to give, ensuring that charities don’t reflect the priorities of just the wealthiest Americans.
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