Predicted Decline in Charitable Giving Could Have Devastating Consequences for Children

Our government may have averted sending us over the fiscal cliff, but the precipitous fall facing these children could be even more devastating. Rest assured that we will be working hard to see that it does not happen.
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The federal tax code has long provided an incentive for charitable giving. And yet, the modest adjustments made to U.S. payroll taxes, an uptick of 2 percent that returns the rate to 2010 levels, could have more than a moderate impact on what people donate to nonprofits. In fact, if the results of a recent survey sponsored by ChildFund International are borne out, the increase in taxes designed to keep the nation from falling over the so-called "fiscal cliff" could be enough to push nonprofit organizations over a precipice of our own.

When asked if the bump in payroll taxes would have an effect on what they give to charity, just over half (54 percent) of survey respondents basically shrugged it off, indicating that the new rates would make no difference. Another 6 percent offered an even more optimistic giving forecast. In looking at the year ahead, they said they actually planned to give more.

But the findings were not all rosy. The less happy news is that one in five (20 percent) survey respondents indicated they would be giving less. How much less? According to the survey, the average decline in giving is predicted to be 29 percent. In other words, about one-fifth of the country said they expect their charitable donations to go down by almost one third. The figure is staggering.

For organizations like ChildFund International, that survey finding has reverberated through our ranks with alarming concern, and other nonprofits large and small are likely meeting that statistic with equal levels of distress. In dollars and cents, the anticipated decline, if true, would mean a loss of more than $6 million to ChildFund. It is a potentially devastating amount, and its impact for us would be real and far-reaching. A revenue decline of that magnitude would likely require that we wind down operations in at least one, and quite possibly two, of the 30 countries where we are currently serving children and their families. At a time when we need to be finding ways to reach more children, the reality is that many fewer would be able to receive the kind of programs that help them improve their lives, disrupt the cycle of poverty and reach beyond the opportunities they would otherwise have.

If there is any comfort, it is the fact that ChildFund supporters are not typical of many individuals who contribute to nonprofit organizations. They are not donors in the traditional sense, but sponsors, taking on the responsibility of sponsoring individual children, children whom they come to know, with whom they correspond and with whom they foster often close relationships. Sponsorships of this kind historically have been more resilient during economic downturn, especially given the comparably modest amount that it takes to become a child sponsor.

For one in five Americans, according to that same survey, that sense of well-being knowing that they are helping others is the primary motivation for giving in the first place. Another 14 percent said the most important factor was that their donation reflected their personal values. And exactly half of those surveyed (50 percent) said they make their giving decisions based on the knowledge that their money was being used appropriately and honestly.

Paradoxically perhaps, while 20 percent of Americans say they will reduce their charitable giving this year based on the payroll tax changes, only 7 percent (among them, more thanlikely, the highest-income donors) say their highest giving priority is the federal tax deduction.

Surveys of this kind can often provide valuable insight into people's outlooks and priorities. They can portend seismic shifts in attitudes and behaviors, and yet they also may simply reflect ephemeral attitudes that capture a fleeting moment in time. Where these particular survey findings fall in that spectrum is unclear, but they cannot be dismissed out of hand. We must interpret them with the proper balance of prudence, dispassion and preparation. After all, if these findings do come to pass, the stakes are high, and many thousands of children and their families will feel the residual impact in a real and lasting way.

Our government may have averted sending us over the fiscal cliff, but the precipitous fall facing these children could be even more devastating. Rest assured that we will be working hard to see that it does not happen.

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