Let’s start with some interesting facts on charitable giving:

• The largest slice of the charitable giving pie comes from individuals, at $227.41 billion in 2009 — contributing to 75 percent of total giving — followed by foundations ($38.44 billion / 13 percent), bequests ($23.8 billion / 8 percent), and corporations ($14.1 billion / 4 percent).
• Giving USA Foundation™ and its research partner, the Center on Philanthropy at Indiana University, reported that total charitable contributions from American individuals, corporations and foundations were an estimated $290.89 billion in 2010, up from a revised estimate of $280.30 billion for 2009. The 2010 estimate represents growth of 3.8 percent in current dollars and 2.1 percent in inflation-adjusted dollars, even though real income declined over the same period.
• Approximately 65 percent of US households give to charity, with an average annual contribution of $2,213 and mean of $870. When we look at high net worth households, the numbers change quite drastically. An astounding 98 percent of high net worth households give to charity.
• According to the IRS, households with income under $50k give about 2% of income and the percentage grows to 3.4% for households with adjusted gross income over $500,000.

Individuals clearly play an important role in supporting charitable work; now let’s look at the role the government plays in encouraging or discouraging giving.

In order to discourage over-estimating charitable gifts, as of 2007 the Federal Government will not allow anyone to deduct a charitable gift that cannot be traced to a credit card, debit card, check, or letter from the charity.  As a result, taxpayers can no longer deduct cash gifts so Toys for Tots, Salvation Army Santas and church giving (placing cash in the collection plate) are being discouraged.  In both 2010 and 2011 the amount of gifts given by check rose yet Toys for Tots donations declined!  The 2011 decline was so great that the deadline was extended and in the end thousands of children did not receive toys.  The restriction on cash gifts has limited these typical holiday giving opportunities, turning taxpayers into Scrooges!

A study by the Center for Philanthropy released in October states that tax rates have the greatest effect on charitable giving and that eliminating the Bush Era tax cuts would decrease charitable giving by about $2.4 billion a year but would raise revenues by about $300 billion a year.  In addition, the Congressional Budget Office study released in 2011 showed that if all taxpayers could deduct charitable gifts (not just itemizers) then charities would have received $2 billion more in gifts and the treasury would have lost $5.2 billion in tax revenues.

The good news is that in spite of the strong effect that tax laws have on charitable giving, people are inspired to continue giving in tough economic times.