The income-tax provisions adopted by Congress to avert the year-end “fiscal cliff” will increase charitable giving by an estimated 1.3 percent, or $3.3-billion in 2013, according to a new Urban Institute analysis.
The boost will come mainly from the decision to increase the top tax bracket from 35 percent to 39.6 percent on income above $400,000 for individuals ($450,000 for married couples), the institute said.
Because the charitable deduction is tied to a person’s tax bracket, those donors will now save $39.60 in taxes for every $100 they give to charity. In other words, their gift will cost them only $60.40, down from $65 under the 35-percent rate.
People in the top 1 percent of income distribution will provide almost all of the higher giving, increasing their donations by an estimated 6.2 percent, the analysis found.
The study also took into account the decision to raise the capital-gains tax from 15 percent to 20 percent. That provides an additional incentive for people to donate stock or other property that has risen sharply in value. Not only will they escape the higher capital-gains tax, they will also get the bigger 39.6-percent tax savings on their gift.
‘Tis the season to be jolly — and for many Americans, to give to charity. A seven-year study of online giving found that a third of all charitable donations in a given year come in December, with the giving rate increasing as the New Year approaches:
Of all giving in a year, 22% of online giving takes place on the last two days of December.
At the peak of the shopping and giving season, consumers are increasingly combining both activities. They are buying products that have charitable tie-ins, shopping through Web portals that send savings to nonprofits, and donating at the registers when they check out at stores.
These charity-linked purchases might give consumers a good feeling, but are they good for charities? Maybe so, but only if those shopping decisions aren’t taking the place of other charitable giving, say some specialists.
Charitable shopping “undermines the philanthropy of a nonprofit through diminished charitable donations,” said Sondra Dellaripa, principal consultant for the nonprofit consultancy Harvest Development Group. In fund-raising development for charities, she said, it is important to build a relationship with a donor — something that doesn’t happen in these transactions.
So, how can you make your shopping turn into giving while keeping in mind how much you’re really giving to charity? Not all products with charity tie-ins are created equal.
For those shopping online, there are pass-through sites where a charity gets money every time a consumer makes a purchase. The donated percentage of the purchase price varies from 1 to 25 percent.
Some deliver no money to charity at all; they’re just for awareness. Consumers can check this, before they buy, on the product’s website or by reading the tiny print on the product’s packaging.
Bill Gates and Warren Buffett are the most philanthropic folks on the planet. To date the men have given away $28 billion and $17.5 billion respectively.
And Buffett’s and Gates’ partnership in generosity is by now well-known. In 2006, Buffett pledged to donate 10 million shares of Berkshire Hathaway stock to the Bill & Melinda Gates Foundation. The gift, then valued around $31 billion, is given in annual increments of 5% of the remaining pledged shares. So far, more than $9.5 billion has been transferred—and largely given away.
One of Buffett’s few requirements is that each installment be spent within a year of receipt. So the 2011 payment of about $1.5 billion must be granted out in 2012. His other stipulations are that use of his gift must meet all legal requirements of charity and that Bill or Melinda must be alive and active in the foundation for the pledge to hold.
Buffett’s $1.25 billion contribution in 2009 accounted for slightly more than 50% of the just under $2.5 billion given by the foundation in 2010. So that year, by Forbes estimations, Buffett gave $751 million to global health and $157 million to education, while Gates gave $734 million and $154 million, correspondingly.
In total, Forbes estimates that Gates has given around $8.3 billion toward health and $4.6 billion toward education. Buffett’s health total is about $3.9 billon and his education number is around $1.1 billion.
With the U.S. election nearing, some of America’s wealthiest argue that they would give more to charity if they paid lower taxes, as they surely would under proposals put forth by Mitt Romney and in the House-approved budget drafted by his running mate Paul Ryan.
Such an assertion is directly contradicted by scholarly studies. Studies indicate that when taxes go down, people give less generously. Lower taxes mean that what scholars call “the price of giving” goes up; the value of the tax deduction per donated dollar is less.
The notion that the wealthy will pay out in voluntary contributions what they don’t pay in mandatory taxes may seem an attractive proposition to some charities, but it just isn’t so.
While there may be more discretionary money in the pockets of millionaires, it tends to stay there. As a matter of fact, the wealthy give a smaller percentage of their income to charity than do moderate- and low-income people.
The social psychologist Paul Piff, who studies the effects of income on personal behavior, told The Chronicle of Philanthropy last month that “the more wealth you have, the more focused on your own self and your own needs you become and the less attuned to the needs of other people.” He has shown that wealth can make people “more selfish, more insular, and less compassionate than other people.”
Much of this has been known since 1990 when Terry Odendahl published Charity Begins at Home; wealthy Americans tend to support the nonprofit institutions that they themselves use. That includes elite universities, museums, operas, and performing-arts groups as well as other cultural institutions and some hospitals and medical facilities. Few would consider these institutions to be on the frontline of charities dealing with today’s most pressing problems.
A new study on the generosity of Americans confirms the suggestion that the least religious are also the stingiest about giving money to charity.
The study released by the Chronicle of Philanthropy found that residents in states where religious participation is higher than the rest of the nation gave the greatest percentage of their discretionary income to charity.
Northeast residents, with lower religious participation, was the least generous to charities.
The study was based on Internal Revenue Service records of people who itemized deductions in 2008, the most recent year statistics were available. By focusing on the percentage given to charity from discretionary income — the money left over after necessities are paid for — the study aimed to remove variables such as the differing costs of living around the country. Churches are among the organizations counted as charities by the study.
A study by The Chronicle of Philanthropy, based on Internal Revenue Service records, provides an unusually rich look at giving by geography and income level. The study uses the most recent data available and provides detail about the relative generosity of US states, cities, towns, and even ZIP codes based on the share of discretionary income their residents gave.
The Chronicle’s study examines taxpayers who earned $50,000 or more. They donated a median of 4.7 percent of their discretionary income. Altogether, they provided $135-billion to charity, nearly two-thirds of the $214-billion donated by all individuals in 2008, according to “Giving USA,” the benchmark of American giving.
Among other findings:
The rich aren’t the most generous. Low-income people give a far bigger share of their discretionary income to charities. People who make $50,000 to $75,000 give an average of 7.6 percent of their discretionary income to charity, compared with an average of 4.2 percent for people who make $100,000 or more.
As for the 1 percent: Rich people who live in neighborhoods with many other wealthy people give a smaller share of their incomes to charity than rich people who live in more economically diverse communities.
Religion has a big influence on giving patterns. Regions of the country that are deeply religious are more generous than those that are not.
When a Silicon Valley firm goes public, it can result in scores of employees instantly becoming millionaires. But what happens then? Following is an excerpt of a San Francisco Chronicle op ed written by Kerry Olson and Dave Katz, co-founders of the Firelight Foundation:
Wealthy folks will eventually have to ask themselves an important question: What should I do with this money?
As a couple who was fortunate enough to face that question when we benefited from Juniper Networks’ IPO more than a decade ago, we would urge [IPO firm] employees to consider devoting a share of their newfound wealth to philanthropy.
They are well suited to charitable giving, but not just because they have money. They’ve proved that they rapidly can build a successful, innovative organization from scratch – as well as identify needs within a community and then meet them. Skills like these are crucial to solving the difficult social, scientific and political problems plaguing our world today.
Previously unimaginable lifestyles will be within reach – but so will the ability to help people and causes in life-changing ways. And while it may be tempting to take care of all the friends and family who come calling, an ad hoc approach to charity can grow overwhelming – and lead to well-intentioned but counterproductive giving.
The Bill and Melinda Gates Foundation provides an instructive model. The Gates foundation’s investments in vaccinations and antibiotics have saved millions of lives and generated billions in economic activity in Africa. Such willingness to try new approaches to solving social problems – and to evaluate candidly whether they’re working – comes directly out of the culture of entrepreneurship embodied by [many] Silicon Valley firms.