Where Do We Go From Here—One Person’s Thoughts

A reporter from a national publication recently called me, as they frequently do at the end of the year, to ask “What will happen in fundraising in the next year?”  Everyone is always wondering what is going to happen in the future, just like they were wondering what would happen after the recent presidential election.  I always tell them, “I don’t know.”  But here is what I feel will happen.  I have long believed that 2013 would lead towards a booming economic expansion.

The economy has been at a near standstill for five years.  The stock market has basically recovered and is poised for another advance.  The housing market and unemployment numbers are steadily improving.   Individual investors have been waiting to see what the election would bring, and corporations have been sitting on piles of cash (all waiting to see which candidate would win).

I have long felt that the economic boom would begin in about March 2013 if President Obama was re-elected (people would take gains before tax rates rise), but that it would take another three to four months to happen if Mr. Romney was elected (so Mr. Romney would have time to get into office and lower marginal tax rates).  The election is over, and moderate Republicans seem to be aligning with the president and moderate Democrats to solve the problem of the fiscal cliff (because if this is not done, all bets are off as to what the repercussions might be).

My feeling is that since President Obama was re-elected, folks will redeem shares of stock which pay big dividends and other assets where they have large accumulated (but unrealized) capital gains.   They will do this because they want to take that income and pay their taxes while the rates are lower, before the marginal tax rates go up.  They will use those proceeds to make other investments, which will cause the money to circulate in the economy, creating a churn whose multiplier effect will benefit many businesses, service providers and their employees.

With the President re-elected, it seems to be happening thusly.  My expectation is for a robust economic expansion beginning late in the first quarter of 2013.  I further believe that charitable giving will go up right along with spending as people have lots of disposable cash cycling through their systems.  The multiplier effect will lead to many people and organizations benefitting from the movement of that money through our economy.

And, when people sell securities and other assets subject to current (lower) long-term capital gains rates this year, more than likely they will keep the funds until next year when they invest this money in other opportunities and make gifts which will be more beneficial to them under the new higher marginal income tax rates likely to be in force in 2013 and beyond.

I have already read published reports of many corporations issuing ‘special’ dividends to their stockholders for this very reason—to enable them to assess their value gained, while paying the lower marginal tax rates.

What does that mean for Non-Profit Organizations?

In my opinion, if an agreement is made to address the budgetary issues and the fiscal cliff, we will see more nonprofit organizations actively seeking significant money in the community.  Increased income and especially cash flow will enable charitable giving to rise to new heights in 2013 and especially in 2014.

What are you and your organization doing to gather your share of this treasure?  To the warrior go the spoils and to the effective solicitor go all the major gifts.  If you need help structuring a capital campaign or helping you build or strengthen your major gifts program, please give me a call.   CDS can help you.