“[A tax loophole is] something that benefits the other guy. It if benefits you, it is tax reform.” – Sen. Russell Long

(warning: this begins with a discussion of the current tax bill and its implications for charitable giving. If that sounds boring, or you know it already, you can skip down to what nonprofits can do in different tax situations. That picks up right after the picture of the Beatles’ single “Taxman”)

Angela Streubig’s piece in NonProfit Pro is well worth a read about the implications of tax reform and tax deductibility. In particular, she points out that the Joint Committee on Taxation (JCT) predicts that the bill that just passed the House would increase the number of people, particularly upper-income Americans, who don’t itemize their deductions by 30+ million people.

So what will that do to giving? John List’s research into the market for charitable giving found that

“charitable giving is at least unitary price elastic if not price elastic, especially amongst the high-income classes. This result suggests that if one were interested in stimulating the charitable sector, one avenue is to enhance the tax deductibility of individual charitable contributions.”

For those who don’t remember microeconomics, price elastic means that as the price of something goes up, consumption goes down (and price elasticity measures how much this is true; oxygen is, for example, price inelastic – if you don’t have any, you’d pay for it, no matter the price).

So if we increase the cost of giving by making it so that more and more well-heeled individuals don’t get a tax-benefit for donating, donating goes down. JCT estimates by $100 billion. That’s billion with a B, as in “Boy, that’s a lot of money.”

As to the wisdom of this endeavor, there are three ways social ills can be remedied:

1. By the government intervening
2. By individuals intervening, often through non-profits
3. By shaking our heads and saying “it sure sucks to be you, person-impacted-by-a-social-ill”

There is a robust and legitimate debate to be had as to whether #1 or #2 is better –that used to be what our political parties were based on. But when you defund #1 and remove incentives for #2, you are going to have more of #3.

So if you are the calling-your-Senator type, now would be a good time to. If you aren’t, it would still be a good time. (BTW, what DMA recommends is something called a universal charitable deduction. Charitable donations would be deducted before deductions are or aren’t itemized; it would solve this issue in one fell swoop*).

Thanks to those who hung in there through the opener there. For those who skipped down, I can’t blame you.

So what do you do differently if tax deductibility went away entirely tomorrow?

Nothing.

Tax deductibility is not a reason to give. It is something that makes giving cheaper. If it’s cheaper, you get more giving; if it’s more expensive, you get less. But those are mere points on a line.

As much as you can get out of removing friction and costs out of the giving process, you can always always always make a bigger impact by addressing the core reason a person gives.

There are two hypotheses why we give: that we want to do good in the world and we want the feeling doing good in the world. Often, these go together, but consider whether you would rather give to an efficient organization who doesn’t make you feel your own personal impact versus a slightly less efficient one who does. That conflict is often present in thinking about giving.

The truth is somewhere in the middle. Harbaugh, Mayr, and Burghart studied the difference between give and take. That is, they looked at how much enjoyment people got out of paying a tax that they knew would go to a positive end versus freely donating the same amount. It turned out they liked having a positive impact either way, but they preferred to donate than to be taxed. Donors wanted to be the hero of the story.

This all happens at the neural level. So, despite some scholars separating us into emotional altruists (bleeding hearts) and effective altruists (Spocks), we all live somewhere between wanting good to be done for its own sake and wanting the feeling of being the instrument of good.

I’ll assume that someone else in your organization is responsible for what good is done in the world (if you wear that hat and the fundraising hat, I’ve done that before: you have my condolences)

That means the one and only lever you have is making someone feel better about their giving.

The coming fight for donors and donations will not be over who can get the most appeals out or even over whether the red or white envelope tests best. It will be about showing them they personally hare having an impact they value. It will be over depth of connection. It will be building commitment with donors and tying their very identity to the organization they support. It will be in the value of the experiences you create for donors.

Hopefully, you were steeling yourself for this fight, because it’s happening regardless of tax policy. And if not, let’s lace up.

* There are other significant issues in the tax bill to our industry like the advocacy work that nonprofits can or can’t do. I omit these for time, but recommend lending your voice to the effort and your shoulder to the plow.