On Giving Tuesday, we are reminded of Americans’ generosity and are challenged to look for ways that public policy can encourage more generosity.

According to the annual Giving USA report, Americans gave $557.16 billion in 2023. Unfortunately, when adjusted for inflation, this was a decline of 2.1%. Nonetheless, we are by far the most generous people on Earth. Check out more giving statistics here.

Americans are charitable for many reasons:

  • Religion: Faith traditions and religious attendance encourage giving. 
  • A culture of mutual aid and altruism: Americans believe in helping others in need rather than waiting for the government, fostering a sense of civic duty.
  • Economic prosperity: Americans generate significant amounts of income and wealth that they choose to give away.
  • Personal connections: Americans tend to support causes they identify with or have firsthand experiences with.
  • Tax incentives: Giving money and possessions away to charities can help reduce tax liability.

We want charitable giving to continue to grow.
Here are 4 ways that policymakers can encourage Americans to grow their generosity:

  1. Cut taxes. Tax cuts fuel charitable giving by individuals and corporations. Americans can give more when they can retain more of their disposable income. Congress should extend the expiring provisions of the 2017 Tax Cuts and Jobs Act that are set to end in 2025. Without taking action, two out of three American households will see their taxes rise. The average family of four making $75,000 would face a $1,500 tax increase.
  2. Leave the charitable deduction alone. The charitable deduction is a tax benefit offered to taxpayers who give their money away to nonprofit organizations. According to Philanthropy Roundtable research, “for every $1 the U.S. Treasury forgoes in potential revenues, the charitable tax deduction results in $1.30 making its way to public charities.” Limits to the charitable deduction should not be used to fund tax cut extensions. 
  3. Don’t tax unrealized gains. As I’ve written, taxing unrealized gains will “kill the stock market for regular investors and destroy wealth among entrepreneurs and innovators.” In addition, wealth taxes like this and other wealth tax proposals will drain the charitable sector of needed resources, as philanthropic expert Elizabeth McGuigan explained in a National Review op-ed. 
  4. Encourage the use of different giving vehicles. Donor-advised funds (DAFs) are individual philanthropic accounts that donors can use to direct grants to nonprofit organizations. DAFs are popular because they offer tax savings, cost savings, and privacy for those who want to support causes. New proposed regulations by the IRS on DAFs are counterproductive and should not be adopted.

Americans are generous people because of their culture of giving, independence, faith, and the prosperity of the free market system. Charities and the people or causes they serve benefit from this generosity.

The role of government should be to encourage charitable giving not quench it. Tax policy is a tool that federal and state lawmakers can wield to accomplish this goal. It’s our job to educate them to understand how tax policy and charitable giving are related.