2018 Tax Reform: Doom & Gloom?
I don’t think so.
Whenever there has been a change in the U.S. tax laws, I always consult with my accountant for a better understanding. Arthur, who also happens to be my brother-in-law, always has the ability to explain such impact in understandable terms.
So, at last month’s family Hanukkah gathering, I posed the question to Arthur, and listened, with many other family members, to his explanation.
Arthur explained the increase in the estate tax exemption from $5 million to $10 million. For many years, there has been an industry created through various trust instruments – by accountants, lawyers, and financial advisors – for very wealthy people to avoid paying the estate tax. Now, at least some of those people might not need to seek such help. I asked Arthur about SALT, state and local taxes and the new $10,000 limit.
“Elections have consequences”, Arthur said.
There has been much written how the 2018 Tax Reform might impact charitable giving. In my mind, the jury is still out on this. We don’t really know. In terms of our synagogues, and really all houses of worship, I don’t think the primary reason people are fulfilling their dues – annual commitment obligations has much to do with tax deductibility. Belonging to a synagogue does foster in us, hopefully, a greater sense of community as well as responsibility through dues/annual commitments. I would like to think that people fulfill such financial obligations due to a religious belief, or for some even a higher belief, that being a part of a community has meaning.
It is for this reason that I believe that synagogues, and all houses of worship, may see minimal impact in terms of decreased charitable support.
Here are other reasons as to why there might not be anything to worry about:
- Beginning in February, many congregants will see an increase in their take home pay.
- People with children attending private school will now be able to utilize $10,000 for tuition from their 529 College Fund.
- And of course congregants who are high earners will have a lot more disposable income.
More ominous articles are predicting that due to the SALT maximum deduction of $10,000, not as many people will itemize and simply take the standard deduction. And that this would affect charitable giving. But today, there is even a movement in some local townships in New Jersey for people to donate to the local municipality the same amount they would pay for property taxes. And this may catch on in other communities.
Maybe congregants approached for a significant gift to a capital or endowment campaign might have some hesitation. Such reasons might be more psychological than due to tax reform. I have read numerous studies regarding the reasons why people make major gifts. “Donative Intent” is always chosen more frequently than “tax deductibility” as a reason for such gifts.
But tax reform is new to all of us – not yet a month old – and the jury is still out. Keep making the case as to the synagogue’s impact to touch people Jewishly and help them feel a part of a community. Fundraising success will continue and there won’t be any “doom and gloom”.