With the … let’s just call it “excitement”  … of the 2024 election now in the rearview mirror, it’s time to consider what comes next. Political swings are often accompanied by uncertainty, sometimes even chaos. Charitable giving is voluntary behavior, and in the face of uncertainty and chaos the rational choice is to postpone voluntary decisions like whether to make a charitable gift. The savvy planned giving officer will pivot to reinforce the reasons for giving. As tempting as it is to fret over politics, tax policy, the economy, and the stock market, we really have no control over these factors. Instead, this is an opportunity to focus on the mission, explain the community's needs have not changed, and help our donors understand the difference they can make with their next charitable contribution.

Still, it is worthwhile to review the impact of past changes in the balance of political power on overall charitable giving. 

Fifteen years ago, articles about the “fiscal cliff” were all over the news. The “fiscal cliff” referred to the looming expiration of a basket of tax reductions that had been included in the Economic Growth and Tax Relief Reconciliation Act of 2001. To pass muster with Congressional budget rules that limited the cost of that legislation, the tax reductions were set to expire on December 31, 2010. As the sunset date grew nearer, the big question was would Congress act to extend the tax reductions or allow them to expire and revert the U.S. to a higher tax regime?

Well, here we are again.

The Tax Cuts and Jobs Act of 2017 (TCJA) included a variety of changes designed to reduce federal taxes. The most dramatic of these were a doubling of the gift, estate, and generation skipping tax exemptions and of the standard deduction. The TCJA also eliminated or limited several popular itemized deductions, such as for mortgage interest (reduced from interest on the first $1 million to interest on the first $750,000) and state and local taxes (limited to $10,000 instead of unlimited). In addition, it reduced somewhat federal income tax rates and raised the income brackets at which they kicked in. In the wake of these changes, the fraction of estates that pay federal estate tax declined from an already very low 1% to a miniscule 0.1%, and the fraction of taxpayers who itemize their deductions declined from about 30% to about 10%.

Unless Congress acts, these tax reductions will expire on December 31, 2025. Donors and their advisors are beginning to plan for this possibility.