Two recent, high-profile studies suggest that donors who support religious congregations are more committed to their charitable giving than those who give to secular organizations, making giving to religious organizations, which are the long-time top recipient category for charitable dollars, a persistent bright spot in a household donations landscape transformed by Trump-era tax law changes.
In late July, the National Bureau of Economic Research published a report that examined the charitable impact of a key provision in the 2017 Tax Cuts and Jobs Act, finding that the law’s alteration in the standard tax deduction contributed to a $16 billion “permanent annual drop” in giving. The bill raised the standard tax deduction, eliminating the need to itemize and deduct charitable outlays for many.
Roughly 23 million households switched from itemizing their charitable deductions in 2017 to taking the larger standard deduction in 2018. For those that made the switch, the amount they gave to charity decreased by an average of $880. The study’s one faint silver lining was that the increased standard deduction “caused little change in giving to religious congregations,” the authors wrote. Direct services organizations bore the brunt of the drop-off in support, but countless households kept the money flowing to “churches, synagogues, mosques and TV/radio ministries.”
The findings came about a month after Giving USA’s annual report found that inflation-adjusted giving for religion — defined as giving to congregations, religious media and missionary societies — declined 1% from 2022 to 2023. The study’s co-authors, Anna Pruitt and Jon Bergdoll, blamed the decrease, in part, to the “dampening effects of the Tax Cuts and Jobs Act.” Nonetheless, total giving to religion outperformed the aggregate field, which saw a 2.1% decrease, and at $146 billion, constituted 24% of the $598 billion donated in 2023. It remained the largest recipient area of charitable support, far eclipsing the runner-up, human services, at $89 billion.
While religious organizations aren’t completely immune from inflationary pressures and the downstream effects of the TCJA, the way their donors go about giving sets these organizations apart from most secular organizations.
“Many people are accustomed to thinking that all giving is the same, regardless of what the specific purpose is or what type of organization receives it,” said the NBER report’s co-author Mark Ottoni-Wilhelm, professor of economics at Indiana University Indianapolis and professor of philanthropic studies at the Indiana University Lilly Family School of Philanthropy, via email. “But in fact, a tremendous amount of research shows that giving to religious congregations is different than giving to other types of organizations.”
Effectively teaching giving behavior
The differences in how donors give to religious congregations versus secular organizations are shaped by a confluence of behaviors, experiences and demographic factors.
Perhaps the most salient variable is how frequently an individual attends a religious service. The 2017 “Giving USA Special Report on Giving to Religion” found that “people who attend religious services on a monthly basis are 11 times more likely to give to religious congregations, and give an average of $1,737 more to religion per year than people who attend less than once a month.” In addition, 62% of religious households give to any type of charity, compared with 46% of households with no religious affiliation.
But saying that donors kept the checks flowing to congregations post-TCJA because they attended services or hail from a religious household doesn’t tell the whole story. Individuals — religious or otherwise — don’t materialize as fully formed donors out of thin air.
Consider what Ottoni-Wilhelm calls the “intergenerational transmission of giving behaviors.” The phrase calls to mind parents bringing their children to annual fundraisers or a succession of heirs supporting the same alma mater. Yet “in studying transmission of giving behavior across generations within the same families,” Ottoni-Wilhelm said, “the transmission rates for giving to religious congregations are three times stronger than for giving to charitable organizations.”
If a parent consistently tells their children that giving to their church is important, that teaching can have a lasting impact. In a 2016 study titled “Generational Transmission of Religious Giving: Instilling Giving Habits across the Life Course,” researchers Patricia Snell Herzog and Scott Mitchell noted, “in many cases, it seemed that [religious] giving later in life was shaped by parental teachings about giving in younger years, which were activated or supported in adulthood religious participation.”
Of course, another crucial variable in higher intergenerational giving to religious congregations is the public and repetitive nature of the act of giving itself. “Every week,” a parent told Herzog and Mitchell, “they [their children] see us go to church. They see us write out a check, put it in an envelope, and put it in the [plate]; so [we] model giving.”
Children witness this week after week, year after year, and carry the experience into adulthood, which is why “adolescents are much more aware if a parent gives to a religious congregation than if a parent gives to a charitable organization,” Ottoni-Wilhelm said. We don’t have a viable secular analog to the prolonged, consistent and public form of giving to religious congregations.
For Ottoni-Wilhelm, these deeply ingrained experiences explain why many supporters of religious congregations shrugged when the TCJA — to appropriate terminology from the NBER paper — raised the “price” of donating by increasing standardized deduction. “Based on this background knowledge,” he said, “it is not surprising that the price responsiveness of giving to charitable organizations is different than the price responsiveness of giving to religious congregations.”
Redefining “religious giving”
The big question for religious congregations is whether they can count on this unflinching level of support moving forward.
In late June, the Lake Institute on Faith & Giving, which is part of the Lilly Family School of Philanthropy, published Pruitt and Bergdoll’s piece digging into the data about giving to religious organizations.
Giving to religion — which, again, Giving USA defined as giving to congregations, religious media and missionary societies — “peaked in 2016, and has declined in five of the seven years since,” Pruitt and Bergdoll wrote. Despite its prevailing spot as the highest recipient category in Giving USA’s report, it was also the only area in the study where inflation-adjusted donations were lower in 2023 compared to 2019.
The pair posited a handful of theories for the decreases, such as the continued decline in the percentage of Americans who identify as religious and the fact that in-person attendance rates for religious services haven’t rebounded to pre-pandemic levels.
They also cited revealing shifts in funder demographics. Thanks to a turbulent stock market, inflationary pressures and the TCJA, giving from the generally smaller donors demographically inclined to support religious congregations continues to shrink as a share of total giving compared to foundations and corporations. And while giving from affluent individuals is increasing, those donors “tend to give a smaller share of their total giving to religion when compared to everyday, middle-income donors,” Pruitt and Bergdoll wrote.
Thankfully, their analysis, just like the NBER report, included something faintly resembling a silver lining. “Additional research is needed to determine whether the charitable giving that was previously going to religion is being redirected to other causes, such as religiously affiliated food pantries or other service organizations,” they wrote. It’s an important hypothesis because it dramatically expands the definition of religious giving.
Giving USA’s definition of giving to religion “does not include the tens of thousands of faith-based nonprofits across the United States that are providing education, social services or humanitarian aid,” wrote the faculty of the Lilly Family School of Philanthropy in a 2019 Stanford Social Innovation Review guest post. (The Giving USA reports are researched and written by Lilly Family School of Philanthropy staff.)
The faculty noted that if the definition of religious giving included houses of worship and faith-based nonprofits like the Salvation Army, American Jewish World Service and Islamic Relief USA, “religious giving would make up 73% of all charitable giving.”
The five-year-old data point may be a bit dated, but the larger premise still holds — by not factoring in support to faith-based nonprofits, Giving USA’s definition of “religious giving” doesn’t fully capture donor support to congregations and faith-based charities, which is a comforting thought for folks who are concerned about the sector’s long-term health.
For further reading, check out IP’s Holly Hall’s advice for leaders presiding over faith-based nonprofits.
