Trump’s Tax Policies Slash Wealthy Philanthropy by $4 Billion, Outpacing Middle-Class Efforts
Recent changes in tax policies under President Donald Trump may significantly impact charitable donations from wealthy philanthropists. The modifications, outlined in the new tax legislation, aim to limit the benefits that high-income donors receive when making contributions beginning in 2026.
Impact of Trump’s Tax Policies on Philanthropy
The comprehensive bill, often referred to as “One Big Beautiful Bill,” introduces a cap on the effective tax benefit for affluent donors. This reduction will lower the benefit from 37% to 35%. Additionally, philanthropic deductions for itemizers will only apply to donations exceeding 0.5% of adjusted gross income.
Organizations and research institutions are raising alarms about the potential effects of these changes. Estimates from the Indiana University Lilly Family School of Philanthropy predict a decrease in donations ranging from $4.1 billion to $6.1 billion. This decline poses a serious challenge for charitable causes, especially as a limited number of billionaires contribute at levels that lower-income donors cannot match.
Middle-Class Donors’ Limitations
Approximately 140 million taxpayers who do not itemize their deductions will continue to be able to deduct up to $1,000 in cash donations. It is noteworthy that around 90% of taxpayers have opted for the standard deduction since its increase during Trump’s initial term in 2017. Although nonprofit organizations emphasize that even small contributions are valuable, the bulk of philanthropy remains concentrated in the hands of a few wealthy individuals.
Experts indicate that the modest reduction in tax benefits for high earners might not seem impactful at first glance. However, considering the scale of donations from top philanthropists, even slight changes can have significant repercussions.
Key Philanthropic Contributions from Billionaires
America hosts the highest number of billionaires globally, with several using their wealth to support various causes. Since 2020, MacKenzie Scott, a prominent philanthropist and former wife of Jeff Bezos, has donated an impressive $19.25 billion through her foundation, Yield Giving. Her recent contributions include:
- $80 million to Howard University
- $50 million to Virginia State University
- $40 million to the African American Cultural Heritage Action Fund
- $60 million to the Center for Disaster Philanthropy
Melinda French Gates, another influential figure in philanthropy, has also made significant contributions. Alongside her former husband, Bill Gates, she co-founded the Gates Foundation, which allocated $8.01 billion last year to fight poverty, disease, and promote gender equality.
Challenges Facing Middle-Class Philanthropy
While many billionaires are committed to philanthropy, only a small fraction follow through on their promises to donate large portions of their wealth. The Giving Pledge Movement, started by Warren Buffett, encourages billionaires to contribute at least half of their fortunes. Currently, only about 250 participants are involved, collectively representing over $600 billion in potential donations.
Despite wealthy individuals continuing to amass wealth due to favorable tax policies, the burden of charitable giving may shift further away from the middle class. Data indicates a declining number of American donors, with participation falling from 66.2% in 2000 to 45.8% in 2020. Although the amount contributed by the average U.S. donor increased by 16.6% from 2018 to 2020, the contributing donor base is shrinking.
Experts stress the need for initiatives that might encourage middle-class philanthropy, as rising living costs further constrain the capacity of average individuals to contribute. What remains clear is that the implications of Trump’s tax policies could profoundly reshape the landscape of American philanthropy.
