Last year, we spoke with Anna Pruitt, Ph.D., and Tessa Skidmore about the Philanthropy Outlook, a report by the Lilly Family School of Philanthropy presented by Marts & Lundy that predicts baseline measures of giving for the next two years.
In order to account for tax policy changes passed at the end of 2017, the school’s research team restructured the report.
Included was a new section on tax policy and a section focused on three various scenarios that could occur due to the combined effects of economic factors and tax policy changes.
Fast forward one year, and Skidmore discussed the new report predicting giving in 2019 & 2020 (released on January 23), and how the research team continues to adapt it to best fit current economic realities.
“We want to include the most up-to-date information and respond appropriately to changes in economic factors and tax policy,” Skidmore explained.
As a result, the team decided to further strengthen the scenarios from last year and the projections of giving by individuals, foundations, corporations, and estates (sources of giving), and giving to education, health, and public-society benefit organizations (recipients of giving). To do so, they formed a partnership with the Wharton School of Business at the University of Pennsylvania.
The Wharton School has produced research on the potential impact of the tax policy changes on the economy, including providing estimates on how much they think the number of itemizers will decrease.
“So, we partnered with them by including some of their economic variables in the model. As a result, the model incorporates additional expertise in economic forecasting and tax policy changes in order to enhance the report as a whole,” Skidmore said.
In addition, the research team was also able to utilize the partnership to include upper and lower bounds for the projections of giving by source and to recipients.
“We have our baseline projections of giving that we’re confident in,” Skidmore said. “We realized though, that people responded well to the scenario section from last year. So, by collaborating with the Wharton School, we were able to insert upper and lower bounds for the projections based on GDP. In other words, we have our baseline projections, plus a lower bound if GDP is lower than expected, and a higher bound if GDP is higher than expected.”
Overall, the model predicts that giving will grow in 2019 and 2020.
“Many economic indicators, such as measures of employment, wages, housing, and personal income, are continuing to be strong, even with uncertainty about the stock market,” Skidmore said.
She believes that predictions of growth, despite doubt in regards to some factors, are a reflection of U.S. philanthropy as a whole: “It’s important to consider the big picture as to why people give. Some individuals are motivated by tax policy. Some may be motivated by their economic situation. And others may give because it’s a part of their identity; they’ll continue to give during times of policy and economic uncertainty. It depends on people’s motivations for giving, but philanthropy has become such a large part of the U.S. economy that periods of uncertainty aren’t going to make it disappear.”
Skidmore noted the benefit to partnerships that strengthen research: “We’re proud of the fact that we’ve taken the extra steps to feel even more confident in these projections. We’re able to respond to environmental changes and further enhance the report as a result of collaborating with others.”