By Timothy Barrett, Argent Trust Company
Fortune recently published the 50 Best Workplaces for Giving Back complied by the Great Place to Work Institute, based in San Paulo, Brazil. Factors that contributed to making this list include giving employees time off to volunteer, offering grant matching for employee charitable gifts, and encouraging staff to use their expertise as a group to combine their ideas, skills and goodwill for specified charitable and community causes supported by the company.
The Bureau of Labor Statistics has reported that, on average from 2011-2015, 6.6% of all people in the U.S. volunteer in some charitable capacity on the average day. Most volunteers are women, most are past retirement age, and the more educated people volunteer more often and for longer hours. Men are more likely to teach, mentor, and provide hands-on services, like building, maintenance and clean-up, while women tend to focus on food preparation, presentation, cleanup and organizing activities.
It’s important to note that neither companies or the employees can take any kind of income tax deduction for the value of their volunteer time. Volunteer hours are not income tax deductible. But, people and companies don’t volunteer for income tax reasons. They volunteer to make a difference in their community or in someone else’s community, which may be in another country.
Of course, you have already read many articles that describe the deducibility of cash, securities and commodity gifts to charity. The 2018 Tax Law increases the available income tax deduction rate for taxpayers (from 50% of AGI to 60%) who itemize while reducing the number of itemizers greatly by doubling the standard deduction. Many charities are scrambling to promote bundling several planned annual gifts into one year so taxpayers can exceed that standard deduction and continue to have good reason to make such gifts. But do the tax laws really incentivize gifting?
In fact, charitable giving rates have always fallen close to two percent of the nation’s gross domestic product since 1955 (when such measurements began). Measuring from the highest marginal income tax rate at 94% in 1944 to its lowest rate at 28% in 1988, income tax rates have not demonstratively altered charitable giving. This fact flies in the face of numerous sources ringing the death knell on charitable giving whenever tax incentives fall.
The argument is that higher income tax rates incentivizes gifting because each charitable dollar costs the taxpayer less. For instance, at the 94% marginal tax rate a charitable dollar provides a $1 deduction at a real cost of only $.06 while the 28% rate has a real cost of $.72. But charitably inclined donors appear mostly unphased over the years as tax rates have fluctuated in much the same way that volunteer hours have remained fairly constant regardless of economic factors, such as unemployment rate, inflation and market swings.
There are many local public and private organizations that seek to enhance the health and well-being of the citizens of Metro Louisville by pursuing special projects, delivering services and goods, and supporting various charitable purposes. These organizations depend greatly on the community volunteering valuable time and effort, and anyone who volunteers will confirm that the demand for more volunteers and more volunteer hours greatly exceeds the supply.
We each can make a measurable difference by contributing our time, talent and money to causes that are important to us. Nonprofits deliver daily critical services, counseling, refuge, training, awareness and support to families and individuals challenged by personal and societal obstacles. Many, but not enough, of these service organizations are the recipients of our charitable giving. Many more of them are in even greater need of our time and expertise.
At Argent Trust Company, we are proud to administer charitable trust strategies that deliver great financial benefits to both the donor and the recipient charities. You will see equally satisfying, but less tangible, benefits if you take advantage of the summer to promote volunteerism at your company or enlist your whole family to help out a local nonprofit. They will be happy to see you!
For more information about Argent Trust Company, click here.
“Do Tax Incentives Affect Charitable Contributions? Evidence from Public Charities’ Reported Revenues”, September 25, 2014, Nicolas J. Duquette, University of Southern California, Sol Price School of Public Policy, 650 Childs Way, Los Angeles, CA 90089.
“Doing Good by the Young and Old: Forty Years of American Volunteering” November 17, 2016, By Nathan Dietz and Robert T. Grimm, Jr., Nonprofit Quarterly Fall 2016 edition.
Timothy Barrett is a Senior Vice President with Argent Trust Company. Timothy is an attorney and wealth strategist who develops tailored proposals to protect, manage, and grow clients’ wealth with an emphasis on business succession, transfer and sales strategies for entrepreneurs.