The $230 Billion Question*

I love data. Especially when they are all over the place. This is the case with estimates of the impact of the charitable tax reforms, proposed in President Obama's (Congress-will-hold-it-hostage-forever-so-it-doesn't-really-matter) Jobs for America Act. 

The Joint Committee on Taxation estimates that $230 billion in government revenue will be "lost" to charitable donations between 2010 and 2014. So the $230 billion question on the table to several economists is what would be the effect on charitable giving if the law:

1. Reduced the charitable tax deduction for wealthy households +
2. Increased the marginal income tax rates they pay?

The experts said:

1. Decrease between $0.8 Billion and $2.43 Billion (1) OR
2. Decrease by between $1.7 billion and $3.2 Billion(2) OR
3. Decrease by between $2.9-billion and $5.6-billion.(3)  

So, changing the law will decrease giving by somewhere between $.8 billion and $5.6 billion - that's quite a range. The scope of that range gives you a sense of how much the economists disagree on the likely effects.  Even the high number estimate is only about 2% of annual giving. 

So, what might REALLY disrupt things as we know them?

• The Super Committee (AKA the United States Congress Joint Select Committee on Deficit Reduction) fails to reach a deal and across-the-board cuts in domestic spending go into effect in 2012. The Committee has a deadline of November 23, 2011.
• The collapse of the Euro and its ripple effects.

• Mother Nature hits the US with the world's first trillion dollar natural disaster (this would mean - most likely - one of the major coastal cities) causing massive long-term evacuations (among other horrors).
• A pandemic with which the public health system can't cope. 
• Changes in tax exemptions, deductibility of gifts to churches/synagogues/mosques (my guess - I'd love to see economic models on this). 
• Campaign finance and charities become so intertwined in 2012 Presidential Election that small donors throw up their hands in disgust and stop giving and voting.

• All current signers of the Giving Pledge decide to forego endowments and make their gifts for operating expenses. Starting in 2012. 
• Corporate codes across the U.S. change to provide businesses with documented social returns the same tax treatment as nonprofits.
• High end donors shift their charitable budgets to political giving - deciding it's cheaper to "influence" policy then underwrite direct services.
• Small donors replace cash donations with volunteering, overwhelming local organizations with talent but slashing their contribution budgets.

I can think of all kinds of other possibilities. Some of them might be rule changes, perhaps around telecommunications and how we use mobile phones. Others would be behavioral, new practices for sharing digital information that empower networks more than organizations. Others are only slightly farfetched - involving legal challenges around the rights of robots or with regard to human tissue. Perhaps we'll see a space-based (ocean-based) community where all the roles and rules are written from scratch.

What do you see as potential disruptors - for good or bad - regarding philanthropy as it now works in the U.S.?

(1) IUPUI Campbell Co study.

(2) Urban-Brookings Tax Policy Center Microsimulation Model - presented to Senate Finance Committee, Testimony of Eugene Steuerle

(3) Joseph Cordes, an economics professor at George Washington University