Cut My Taxes and I Will Give More to Charity: Do You Buy It?

An argument for lowering taxes for the wealthy is that they will give more to charities if their taxes were lowered. Is the argument supported with data? Over the past five decades, taxes for the wealthiest 15% of Americans has declined decade after decade. If the arguement about charitable giving is correct, philanthropic giving by the wealthiest of Americans as portion of their annual income would be at its highest point since World War II.

In 1990 Terry Odendahl published Charity Begins at Home. In his book he summarized several studies over the prior decades as well as his own that demonstrated that philoanthropic giving by multimillionaires had not increased when their taxes decreased. Further, he noted that moderate and low-income families give a significantly greater percentage of their income to charities than do the wealthier fifteen percent of Americans. Since, study after study continues to affirm Odendahl's claims. Each year The Chronicle of Philanthropy reports families of modest means continue to be more philanthropic both with their time and money. As a percentage of their income, families of modest means continue to give at a much higher rate than the wealthiest of their neighbors.

If the argument was correct we would evidence an increase in giving by the wealthy each decade since the 1970s as in each decade the taxes paid by the wealthiest has declined each decade. While taxes have decreased, charitable giving by the wealthy as a percentage of their income has not increased. Rather, philanthropic giving has remained flat to having a slight decrease.

Impression and reality are sometimes different, as it is in this arena. Clearly it’s the occasional large gifts that receive headline attention. The occassional $100,000 or $250,000 gift to an organization that catches public attention, not the plethora of $50, $100, $500 and the $1,000 dollar gifts given repeatedly over the year to various local, regional and national charities by families of modest means.

Odendahl also noted the wealthiest also tend to support different charities. He noted the wealthiest tend support strongly organizations that they themselves use, such as the opera, performing arts groups, elite universities, cultural groups and leading medical facilities. Gifts when given to poverty organizations are a fraction of what they give to organizations they and their families frequently utilize. Studies since uphold the same trends continue.

Arguing lower taxes need to be based upon other grounds. Suggesting lower taxes will boast charitable giving is fallacy.

Religious People Are More Generous and Voluteer More

Are religious people more involved in their communities and more generous than their non-religious neighbors? Every year when I read philanthropy reports I have asked myself that question. By using IRS data there have been reports for decades indicating that religious people have higher charitable deductions (about three times higher) than those who do not attend a house of worship There have been similar surveys regarding volunteer activity. For years I have wondered if giving and volunteer activity directly related to the person’s house of worship was subtracted if religious people are more engaged in philanthropic giving and volunteering?

Faith Matters has helped to us to understand the nature of difference. Their work shows that when direct religious activity is taken into account, religious people are more generous and more engaged in volunteer activities than their secular counterparts. Except for arts and cultural groups, religious people give at a higher rate and volunteer more hours even to secular organizations than their non-religious neighbors. What is clear that the difference is evidenced most clearly with services to the poor and elderly.

Eighty percent of Americans claim that they have contributed to a nonprofit in the prior year. When religion is take into account 94% of those who claim to be religious make such contributions compared to 70% of secular citizens.

What is not defined in the studies is whether faith itself creates the difference or if it is in some way tied to a collective cultural expectation and a vehicle for providing information and linking members with opportunities. While data indicates that those who attend a service almost every week are more generous than the occasional attendee, care must be given to view it as evidence that belief in Jesus Christ is what creates the difference. Care must be taken as those who attend a church service only two or three times a year, those who are not normally viewed as being committed believers, are more philanthropic and engaged in volunteering than their secular neighbors and are not that far behind their highly religious friends. Additionally those who are part of non-Christian faith communities also show a higher level of generosity and volunteering. Hence, one may tentatively conclude that there is a sociological dynamic within faith-based communities, not faith itself, are helping to create the differences.

While data from similar indicates that religious people are more generous and volunteer at a greater rate than non-religious people, the same data also indicates that non-religious people are significantly more tolerant on a host of civic issues from religious diversity to social issues to education than their religious neighbors. For the most part, the difference in this area is not surprising.

Great Sounding Statement But Is It?

Patrick Rooney, the interim director of Indiana University’s Center on Philanthropy, the major think thank for Philanthropic last summer wrote regarding the uncertain economic times and charitable giving, “For overall giving, historical precedent suggests the economy’s impact might not be as dire as popular opinion might indicate. In light of financial market upheavals, though, we could be heading into uncharted waters that may or may not follow precedent. The picture is mixed right now. At this point it’s not doom and gloom, but its important for nonprofits to monitor the situation and their individual circumstances. Different types of nonprofits and different regions of the country may be affected differently.” (Philanthropy Matters, Vol 16, Issue 2)

There are a lot of “may” and “might” statements in the quote. With all due respect to the learned Dr. Rooney, the statement sounds like it is something but it is nothing short of a convoluted string of equivocations that really say, “I have not idea what is going to happen.” In the article there are strings of numbers from the past, but not analysis or probative explorations behind the figures. Dr. Rooney takes no real stand and gives no guidence. His statement is similar to those of a palm reader, a bit of everything with so many sweeping statements and escape clauses that no matter what happens he can claim that he was right all along. And his quote stands as a prime example of sounding great but no real content.

United Way

One of the mainstays of the American fundraising landscape is the United Way. The initial purpose of the United Way was to have a combined volunteer based fundraising in the workplace and community for all member agencies. Member agencies provided a range of services from aid to the elderly, to health education, to youth and seniors recreation to fighting poverty to helping to sustain those caught in the grips of poverty. Regardless of one’s two or three philanthropic issues, there were several organizations, both small and large, that were addressing those issues.

Combining resources allowed smaller organizations to be supported and have their organization become known in the community via the combined effort. The United Way allowed small and medium organizations to have a reach into the community, marketing as well as financial, that was beyond their capacity and capabilities. The United Way workplace giving program allowed all employees to be solicited once a year in the work place by their peers. Individuals could give a one time gift or they could arrange for an amount to be deducted from each paycheck.

Though individuals could designate their gifts to a handful of groups if they so wished, most gave to the United Way in general as through it they could help support a range of their philanthropic and community interests. Employees liked the breadth of organizations and causes. They also loved the idea of giving $10 or $20, or $50 a pay that they would never miss and have it add up over the year to something much more significant than if they had to cut a single check. Employers liked having only one annual campaign. Small and moderate sized organizations liked the process as it extended their reach into the community and helped raise more funds than they could competing against hundreds or thousands of other organizations.

Undesignated funds were allocated in grants to a host of its member organizations. The amount granted was based upon balancing the amount raised against the budget of the organization, nature of the programs offered by the organization and the scope of the services provided. Volunteers from the community sat on panels, reviewed requests, listen to presentations and then decided what to award. Though the process involved tough decisions, and though rarely did a member receive its full funding request, most member agencies felt it was on a whole a balanced and fair system. As agencies and volunteers had confidence in the fairness of the system, the United Way was held in high regard which made for a relatively easy solicitation process.

For the last ten years the beloved system has been changing into a system that moves directly away from its roots. The United Way is moving to become a super-foundation with a narrow focus. It’s goal is to fund only programs that provide meaningful results in three areas, a) improving health, b) lowering school drop-out rates, and c) fighting poverty among low-wage workers.

The United Way started to make these changes because income has decreased and people are expecting a greater level of accountability. Donors are looking at making a difference and the United Way believes it is better to make a difference in a narrow scope of issues rather than provide meaningful assistance across a broad array of issues.

Some organizations while providing the same services are rewriting their service descriptions and counting their statistics differently in order to retain funding. Other organizations are receiving a significant increase in funding since they are focused in that area. Other organizations such as those who provide shelter and food, or who provide clothing to the poor, or who help shelter fire victims or provide latch key programs to keep children safe and out of trouble will no longer receive support. A latch key program in an impoverished area with high drop-out rates may well receive funding if it has a strong tutorial program and mentoring program that are designed to help keep teens from dropping out of school.

The three priorities will eventually change. Lowering school drop-out rates is a hot issue today but in seven or ten years, if it is not a hot issue it will no longer be a funding priority. It does not mean that the fighting drop-out rates will be no less important to the social fabric of the community, it just means that it is no longer a hot issue that can be used to secure donations. In other words, the United Way funding priorities are chasing the easy money.

I liked the old United Way. I could give to my environmental and poverty causes through the United Way. I enjoyed learning about small organizations that were making a difference, like the one in DC that trains cooks for local restaurants. I could support that organization. I could have a nice amount deducted from my pay that would help a host of organizations. I liked being able to support a group that had a five year goal to clean up a local creek and develop a walking trail along a three mile stretch. Becoming aware of such organizations, let alone giving to them via the United Way is no longer possible.

The United Way has changed. Its funding priorities do not match my philanthropic interests. As such, I will not be giving to the United Way this year.