Two recent news items are creating an interesting window into the Canadian philanthropic marketplace. The first item was a release from Statistics Canada on Nov. 1 that reported that “Canadian taxfilers reported making charitable donations totalling $8.5 billion in 2006, up 8.3% from 2005, while the number of donors decreased 1.4% to 5.8 million.”
Most of the media reports I saw touted the increase as good news, and commended the removal of capital gains taxes on gifts of securities in the last federal budget as the basis for the continued growth of philanthropic dollars. That is indeed good news, and now that CanadaHelps can accept gifts of securities online, more donors can give to more charities in this tax-effective way.
However, there is the second half of the Statistics Canada statement that disturbs me the most – fewer Canadians are giving. Since CanadaHelps is about encouraging people to get engaged, and to help more people give more dollars to more charities, this isn’t such great news at all. It means we have our work cut out for us.
The second piece of news was one that was released today – the Canadian tax system is increasingly penalizing those with lower incomes, and rewarding the wealthy. This tax system includes charitable donation incentives, incentives that definitely penalize the poor and reward the rich. That’s not a bad thing in itself – we should encourage those who have a lot more to give away to actually give it away. So the thinking goes, the wealthy have a lot more to offer philanthropically, and those of us who are poorer don’t need as many tax incentives to give money away – money needs to be kept to spend on life’s necessities.
The problem is, that’s not how it works. Some of the territories and provinces with the lowest median incomes give the most, according to the same Statistics Canada report. In fact, it seems that communities where income levels are generally low are places where giving is important, and a way of life. I presume that, with economic resources scarcer, the idea of sharing is more embedded as a part of the culture, and that also includes charitable giving. In fact, we’ve also heard that as your income rises, while the size of your donations grows, your donation amount tends to decrease in proportion to your income – lower income people give a higher proportion of their income as gifts than the wealthy.
The gifts of securities tax breaks are a marvellous way of encouraging giving by those who actually own stocks and bonds. And the additional tax incentive for those who give $200 or more per year is also nice. But if you give a little, your tax break for giving is the lowest possible. Basically, if you’re poor and you give, you get much less of a tax break for being generous than a wealthy philanthropist. You can be generous, but if you don’t have money invested outside of an RRSP that you can use for donations, the current tax structure doesn’t reward you very much.
Let me be fair – this isn’t the major reason that we’re seeing lower donation rates among the Canadian public. There are other reasons, including donor confusion in an increasingly scattered charity marketplace, the focus of larger institutions on their wealthiest constituents, and the increasing concern among donors of how their money is being used by charities.
But the story changes online – donors are giving more than they ever have online. They’re giving in larger amounts than through traditional channels, and they’re growing at a rapid rate. Online giving is going against all the trends. Online giving puts donors in the drivers seat, and that’s powerful. While charities still need to address donor disengagement, at least we’ve found a medium that is more attractive to the average donor, and growing in attractiveness year over year. It can provide the transparency that donors wish, and it can help donors choose the cause that best matches their interest among the many competing charities.
Unfortunately, the tax situation still doesn’t encourage giving for the average donor. If we believe in philanthropy as a society, then a policy change will have to be a priority. Currently, there doesn’t seem to be much appetite for this sort of change. If, however, we continue to see annual Statistics Canada reports such as this one, we will need to face a change or risk losing the valuable organizations that provide community services across Canada that don’t attract the major, wealthy donors.
Wonderful blog - thank you! I volunteer for one of those small community organizations. It's certainly a challenging time for us.
Happy Holidays!
Posted by: Laurie Pringle | December 20, 2007 at 01:09 PM