The impact on American charity of donors who itemize

Some point out that most donors wouldn’t be affected by changes in the charitable deduction because 70 percent of Americans don’t itemize. While it is true that people who don’t itemize often give generously from their incomes, they don’t provide the lion’s share of the gifts that help fuel the nonprofit world.

In 2010, the 30 percent of Americans who itemize provided 79 percent of the money “Giving USA” reported that individuals donated to nonprofit organizations.

If a loss of the charitable deduction caused people who itemize deductions to reduce their giving by just 20 percent, that would mean a $34-billion drop in charitable giving, by far the largest decrease since the Great Depression. To put that in perspective, $34-billion is more than three times the sum that individuals donated to all U.S. colleges received last year (not counting bequests).

If nonprofits suddenly had to reduce costs by $34-billion, they could well need to eliminate 5 percent of their work force, or 680,000 jobs. That could increase the unemployment rate in the United States from 7.9 percent to 8.4 percent.

And if government cuts spending, charitable giving will have to play an even more important role in our society as those cuts inevitably put even more strain on the nonprofit infrastructure that enriches Americans’ lives in countless ways.

Excerpts of an article by Robert Sharpe, a fundraising consultant