At the end of last year, with Dec. 31 rapidly approaching, my inbox seemed more full of donation pleas than ever before. New Year’s Eve felt more like a “Giving Tuesday” (especially noticeable given that the holiday fell on a Sunday). While year-end is always significant for nonprofits, there was particular urgency around individual giving, since the new tax law and its doubled standard deduction might eliminate the itemizing of deductible expenses for many taxpayers, likely disincentivizing individual charitable giving in 2018 and beyond. Facing that future, some theatres combined their year-end appeal with a message about the new law. For example, American Repertory Theater wrote:
As a friend of the A.R.T., and in light of pending tax changes, I encourage you to discuss your level of charitable giving with your advisors. It may be advantageous to pre-pay charitable contributions in 2017 if you anticipate you will be in a lower tax bracket and/or not itemizing deductions next year. This may be the right time to upgrade your support for the American Repertory Theater.
As individuals comprise the largest and fastest-growing segment of giving for nonprofits, the new tax law could hit our field hard, depending on how important that deduction is to our individual donors. The laws are complex, and we don’t know yet their precise impact. Today, if you are in the 25 percent tax bracket and itemize on your taxes, you could make $500 worth of contributions for $375 (i.e., you’d receive $125 back at tax time). The new law may mean that some will lower what they give; others may stop entirely; still others, we hope, will simply continue donating. In recent presidential campaigns, large sums have been raised, including from hundreds of thousands of (non-tax-deductible) small gifts. Clearly people will share some of their income for the causes they believe in.
A number of studies delve into the reasons for our unique American spirit of generosity. Every other year, U.S. Trust researches philanthropy among high net worth individuals—defined as those earning more than $200,000 annually and/or with net assets of $1 million or more (exclusive of the value of their homes). In the 2016 study, when asked how their giving would be affected by less favorable tax advantages, 64 percent said they would maintain their giving. In fact, the percentage of those who said they would give regardless of a tax benefit increased from the 2014 version of the study.
Why? Perhaps because this same group of major donors ranks charitable giving and volunteering as the most important avenues for having an impact in society. Seventy-five percent of respondents consider individuals and nonprofits dramatically more effective at solving societal problems than government, so one might conclude they are using their individual wealth, by way of the nonprofit system, to tackle such challenges as education, poverty, quality of life, and the environment. It’s important to note that 26 percent give to the arts, with arts ranking 9th out of 12 categories of giving. At the top of the list are basic needs, education at all levels, religious causes, youth, and family.
Still, there are many unknowns, and there is great cause for concern that the new regulations will wreak havoc on positive giving trends for theatre. In our professional not-for-profit business model, ever-increasing philanthropic giving is essential to mission fulfillment and access. At our Fall Forum on Governance this past November, the Goodman Theatre’s Roche Schulfer, in an excellent keynote, reminded us of economist William Baumol’s “cost disease” and how it affects industries such as the performing arts. Because human beings and their artistic labor are the essential product that we offer, theatre doesn’t benefit from the efficiencies of technology the way many other industries do. To support increasing labor costs, either ticket prices rise beyond the ability of most people to pay—or philanthropy fills the gap, keeping the art form vital and accessible.
Thankfully, philanthropy for theatre had been on the rise overall in the last five years. And while all categories increased, individual giving was particularly noteworthy. Theatre Communications Group’s Theatre Facts 2016 reports that non-trustee individual giving outpaced inflation by 18.9 percent in five years. Trustee giving doubled over the same five-year period, after accounting for inflation.
Even these gains left us with needs, though, particularly as there’s an increased urgency to fortify contributed support. As large institutions continue to grow and require more contributed income to do their important work, how do we also build philanthropic dollars for smaller and midsize organizations and organizations of color, which are also doing crucially important theatre and education programs but have received disproportionately lower philanthropic sums?
Most theatremakers and audience members I talk to are excited by where theatre stands artistically. We are seeing hundreds of new plays and playwrights, as well as education programs for students and community members. Work is being created and supported by players at theatres small, midsize, and large. And individual artists, trustees, funders, and audiences all have a part to play in the success of this new work. But we also know resident theatres require increasing subsidy to exist and thrive. Those who recognize the ways that theatres and theatre artists are central to a healthy society must join us in the fight for our fair share.