The Effect of the Tax Cuts and Jobs Act of 2017 on Private Charitable Giving

Abstract

In this paper I estimate the effect of the Tax Cuts and Jobs Act of 2017 (TCJA) on private philanthropy. With the near doubling of the standard deduction, I predict that the total volume of charitable contributions decreases as a result of the policy. I employ dfference-in-differences, ordinary least squares, and two-stage least squares to estimate the causal impact of the change. I find that the TCJA: (1) causally decreased giving for itemizers relative to non-itemizers and (2) had no noticeable causal effect on donors versus non-donors. I conclude by discussing recommendations for future policy when the TCJA phases out of effect after December 31, 2025. Specifically, I posit that a small, above-the-line charitable deduction be included within the standard deduction to offset the crowding-out of private philanthropy by government incentives not to itemize.