The New Tax Law and its Possible Impact – and a Possible Solution

The New Tax Law and its Possible Impact – and a Possible Solution

The new tax law passed in December will have various impacts on parishioners – maybe you were on line late last month to try to prepay 2018 property taxes to claim that deduction, which will become limited this year.  My primary concern is the effect of the new law on parishioners’ giving to the parish and to the poor.  Almost everything I read says to expect that the impact of the law on charitable giving will be negative.  But there’s one hopeful possibility that I’ll get to in just a bit.  First, the problem.

The problem is, of course, that the tax benefit of charitable giving will be reduced for many people.  That makes it more expensive for them to give, and as a result people may give less.  Experts in charitable giving expect that this will cost charities about 5% of their income in 2018. Let’s bring that home.  Our parish’s budget for FY2018 (which started 9/1/17) anticipates donations of about $833,000.  If we drop 5% from that, it’s over $41,000 we won’t receive; and our anticipated surplus for the year is only about $54,500.  If giving should drop any further, we’d have to think about cutting core programs in order to balance our budget.

But things don’t have to come to that.  Everything will depend on the choices that parishioners make about sacrificial giving.  If nothing changes in the face of this new challenge, we’re in trouble.  If more people choose to give sacrificially, we’ll do fine.  Where do we stand now?

Here are some numbers to think about.  Using the history of calendar year 2017 giving (excluding the 12/30-31 weekend because people talked to me about making their entire 2018 gift in 2017 for tax reasons), in 2017 728 families made at least one recorded contribution to Our Lady of Grace.  (We have 6048 families listed in our census as belonging to the parish – so already that’s only 12% of members who donate in a way we can record.)  Of the recorded givers, the average (for statisticians: mean) gift was $738 – which, over 51 Sundays, averages $14.47 per week.  The median amount – half of givers give more, half give less – was $300 per year, $5.88 per week.  (The mean is “pulled upward” by a few households who give from $5,000 to over $20,000 per year; that’s why the median is a better measure of what’s typical.)  That’s where we are now.

Now let’s do some other math.  The median household income in West Babylon is $83,248.  The nationwide average gift Christians make to their churches is about 2.5%.  (Interestingly, during the Great Depression of the 1930s it was higher – 3.3%.)  Catholics give about 1.5%.  Let’s take that lowest, Catholic rate for a minute: 1.5% of $83,000 is $1,245 – about $24.40 per week for 51 weeks.  How many Our Lady of Grace families contribute at that rate?  One hundred forty: one in five of recorded givers, one parish household in fifty overall.

What do we learn?  I know that some people are incredibly generous – and that not a few people who struggle to pay the mortgage and put food on the table give sacrificially.  But it does seem that there’s some room for a lot of parishioners to grow in their commitment to give sacrificially.  

The traditional target from the Bible for sacrificial giving is 10% of gross income.  Catholics are often encouraged to split that as 5% to the parish, the other 5% to other charities.  If more households came even close to doing that, the new tax law wouldn’t affect our mission or our ministries.  In fact, we could do more – for the poor, for young people, for faith formation, and perhaps entirely new ministries.  But it all depends on the choices parishioners make.  To make up our expected loss every household now giving would have to increase its weekly contribution by about $1.25.  If everyone who can gave an extra $2 a week, it would help make up for those who can’t give more.

It seems clear that the new tax law is likely to hurt the poor and the churches (even if that wasn’t its intent) – but it doesn’t have to.  The ultimate result is not up to the legislators or the president, but up to each of us. .  Until next week, peace.

 


1 “Charitable giving to take a hit from the new tax law.” CBS News, 12/28/17. https://www.cbsnews.com/news/charitable-giving-to-take-a-hit-from-the-tax-law/.  “Charitable giving could drop by $21 billion a year because of the tax changes.” MarketWatch, 12/26/17, https://www.marketwatch.com/story/charitable-giving-could-drop-by-21-billion-a-year-because-of-the-tax-changes-2017-12-23.

2 A few Christmas donation might have been missed since I used 12/29 as the cutoff date for these figures, but otherwise this includes all recorded giving in 2017 except the final weekend.