Study shows one-third of donors would cut giving if deduction didn’t exist

October 18, 2012

At a time when both the Democratic and Republican presidential candidates say they are considering capping the charitable tax deduction, a national Dunham+Company/Campbell Rinker study conducted in the last month shows that the deduction is vital to giving in America.

Although neither candidate has proposed eliminating the deduction, President Barack Obama has repeatedly tried to chip away at it in his annual budget proposals, and Republican challenger Mitt Romney has been vague about his plans, leading some Obama supporters to speculate that Romney would have to eliminate the deduction to meet his fiscal goals.

Thirty-three percent of donors surveyed would reduce their giving if no such deduction existed. The intensity of that response increased among key giving groups, with 40 percent of 40-59 year olds (a vital giving demographic) saying they would reduce their giving. Forty-two percent of conservative donors say the same, and numerous studies, including one recently by The Chronicle of Philanthropy, have shown conservatives to be the most generous givers.

A Dunham+Company/Wilson Perkins Allen survey conducted earlier this year showed three out of four Americans say they do not favor cutting, capping or limiting the charitable tax deduction.

“Our studies have shown that the American people, regardless of household income, education, age, race or gender, say they overwhelmingly support the current tax deduction for charitable contributions,” said Rick Dunham, President+CEO of Dunham+Company. “And now in our latest study among donors to charities we have found the deduction is vital to one-third of those who give, especially key giving groups.”

President Obama wants to limit the deduction to 28 percent for wealthy households, which studies have shown would mean a $5 billion hit to charities. Romney wants a more radical approach of capping all deductions but he has yet to confirm specific recommendations.

The issue of fundamentally changing the charitable tax deduction by the presidential candidates is being raised at a time when the charitable sector has experienced an unprecedented drop in support as a result of the faltering economy.

According to Giving USA, charitable support peaked at $311 billion in 2007 and dropped by 2009 to $281 billion. It has since recovered to $298 billion but at the current rate, The Center on Philanthropy at Indiana University estimates it will take another five years to recover to 2007 levels of giving.

In addition, a recently released study of the top 400 charities in America by The Chronicle of Philanthropy shows that giving across the nonprofit sector is expected to only rise by 1 percent in 2012. This means giving is stagnant, and when adjusted for inflation is actually declining.

“It’s important to remember that 1 out of 10 jobs in America come from the charitable sector,” Dunham said. “And that charities are much more efficient in delivering social good as independent studies have shown that 70 cents of every dollar goes to recipients of charitable services compared to only 30 cents of every dollar from the government. The bottom line is that the charitable tax deduction needs to be protected as a vital incentive to supporting the vibrant and effective work of charities.”

The study was part of a Campbell Rinker Donor Confidence Survey conducted Sept. 7-18, 2012 among 454 U.S. adult donors of at least $20 in the previous year and members of the firm’s online panel, weighted by age to reflect the general U.S. population per the 2010 census. The margin of error is plus or minus 4.6 percent at the 95 percent confidence level.