Six trends to affect philanthropic landscape in 2018

When it comes to the world of philanthropy, 2018 promises to be transformational. Pessimists are concerned about the impact of new federal tax laws, the increase in income inequality, and the growing need for critical social services. Optimists see more reason for hope, believing that we have entered the “golden age of giving.”

Watch for these trends in 2018:

“Trickle-down philanthropy” not likely

“Trickle-down economics” is a theory in which reducing taxes on businesses and the wealthy is supposed to stimulate business investment in the short term, benefiting society at large in the long term. It is widely discredited. “Trickle-down philanthropy” is the similar notion that lower taxes for businesses and corporations will lead to more generous giving. It is even less likely.

The new federal income tax law doubles the standardized deduction – to $12,000 for single filers and $24,000 for those filing jointly. This will likely reduce the percentage of taxpayers who itemize deductions from the current 30 percent to only the wealthiest five percent. As a result, giving in 2018 could fall by $20 billion.

The top five percent – those who will still itemize – tend to focus their giving on big institutions like universities and hospitals. They give less to local, social service and safety-net nonprofits. Historically, smaller nonprofits have been supported by middle-class donors — who no longer have a tax incentive to give.

Plus, the increased estate tax exemption wipes out any tax incentive for all but the wealthiest 1800 Americans to make donations at death. This change is predicted to reduce giving by additional billions.

Trump-inspired giving will sustain

In 2017, there was a surge in politically-motivated “rage philanthropy” across the political spectrum as huge numbers of people gave to organizations that reflected their deepest beliefs.

Both supporters and detractors of President Trump recognize the vital role played by many nonprofits in important issues such as constitutional rights, environmental protection, immigration, healthcare, veterans’ issues — and more. In 2018, Americans will likely continue to use philanthropy as an important and influential form of civic engagement.

Giving circles will continue to grow

In the past decade, giving circles – where individuals (mostly women) pool their money and decide collectively how it will be donated — have tripled in number.

The Collective Giving Research Group found that giving circles have donated $1.29 billion and engaged more than 150,000 donors. Four out of five giving circles focus their efforts on local causes — highlighting human services, women and girls, and education. According to the report, giving circles are “a highly accessible and effective philanthropic strategy to democratize and diversity philanthropy, engage new donors, and increase local giving.” Look for them to grow.

Impact investing will flourish

Currently, trillions of U.S. dollars of assets are under management using environmental, social and governance factors. These statistics are provided by the US SIF Foundation, which monitors sustainable, responsible and impact investing.

The nearly $1 trillion sitting in foundations and donor-advised funds, on the other hand, represents an enormous resource that could be invested for the double bottom line of both financial return and social impact. In 2018, expect that more foundations will “put their money where their missions are” and work to achieve their missions from the engine of their philanthropic assets, not just the fumes.

 Benefits of volunteering recognized

With each new research study, the benefits of volunteering become clearer. Health benefits to the volunteer include lower blood pressure and decreased mortality.

“Voluntarism is good for the health of people who receive social support, but also good for the health of people who offer their help,” said Ichiro Kawachi, professor of social epidemiology at Harvard’s School of Public Health. These benefits should inspire businesses, health care facilities and other entities to provide more opportunities for volunteers to give back.

Philanthropic strategy to go “mainstream”

Increasingly, leaders in families, foundations and businesses understand that philanthropy consists of much more than the transactional act of writing checks or clicking online donation buttons. Today, philanthropy is seen as a strategic and intentional investment that can be transformational — for both society and the donor.

As we ponder the philanthropic landscape in 2018, there is both good news and bad news. Significant challenges will be presented by the new federal tax laws, which remove many traditional incentives for giving – especially to smaller and local nonprofits.

At the same time, positive ongoing trends include the increase in issue-related giving, giving circles, impact investing, and volunteerism. Without doubt, it will be an interesting and impactful year!