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Philanthropy: Does Charity Begin at Home?  

COMMUNITY INDICATORS  

                                                                                                 

Community Indicators are intended to stimulate thoughtful dialogue about your community, they can help identify potential issues, opportunities and problems facing your community. This communication piece is also intended to increase use and understanding of readily accessible demographic data on the web.

                                     

Issue 5, July, 2003

By: Andy Lewis

Center for Community Economic Development

University of Wisconsin Extension

610 Langdon Street, Room 334

Madison, WI 53703

(608) 265-8136, cced@uwex.edu , http://www.uwex.edu/ces/cced/

When a community issue or need is identified and you need to raise resources to address this concern..who 'ya gonna call'?   The school needs to build a new track, but the district has been unable to pass the local funding referendum. The community wants to make improvements at the local park, but the park committee's budget is strained. The community identifies hunger as a major concern and wants to start a food pantry. The community band needs new uniforms.

Roman poet Terence (Publius Terentius Afer) once proclaimed, "Charity Begins at Home". How does your community rank in terms of its charitable tendencies and what can you do to impact that situation?

At an increasing rate, nonprofit organizations rather than government are responding to needs and individuals are asked to provide charitable donations to support the cause. So, just how charitable are your residents? The results might surprise you.

 

I have lived almost my entire life in different parts of Wisconsin and have always believed that Wisconsin residents were both friendly and giving. We once had a state tourism slogan that read, "You're among friends in Wisconsin". But, when you analyze charitable giving data, the results don't appear to match the perception.

The National Center for Charitable Statistics (NCCS) has utilized IRS tax return data to analyze this issue at the state level. In 2002, the NCCS determined that Wisconsin's adjusted gross income per income tax return filed (itemized returns for the year 2000), was exactly "average"...Wisconsin ranked 25th with an average A.G.I. of $44,803. Our average charitable contribution per income tax return however was $829 which ranked 36th. The average charitable contribution per return as a percentage of adjusted gross income per return was 1.8% (Compared to 2.2% for the nation), placing Wisconsin in the lowest quartile (Compared to 2.2% for the nation).

For a copy of the state chart on charitable giving generated by the National Center for Charitable Statistics see:

http://nccs.urban.org/stgive00_chart.pdf

Recently, the Chronicle of Philanthropy took this analysis to the next level by factoring in the cost of living in various parts of the country.

This study analyzed the tax returns of people earning $50,000 or more who itemized their deductions on their tax return. While this sample represents only 18% of all U.S. taxpayers, little reliable data is available on people who make less than $50,000 (People who don't itemize don't report their donations). This segment donated $97 billion to charity, about 80% of the total $122-billion donated by all individuals in 1997, according to estimates compiled by Giving USA. Furthermore, this segment of the population accounts for nearly 54% of all money earned in the nation.

 

According to the analysis by the Chronicle of Philanthropy, the State of Wisconsin and many of its counties, do not compare favorably to the rest of the U.S. when analyzing charitable giving as a percentage of discretionary income. Only 13 Wisconsin counties gave a higher percentage of their discretionary income than the national average (6.4%).

 

For Counties with 10,000 + tax returns, Brown and Winnebago counties made the Chronicles list of "50 Least Generous counties" in the nation.   For Counties with 1,000 - 9,999 returns, Trempeleau, Iowa, Oneida, Green, Oconto, Sauk, Lincoln Counties were given the same distinction.

Source for image: The Chronicle of Philanthropy, May 1 ,2003

For counties with 100-999 returns, Forest, Taylor, Sawyer, Rusk, Washburn received the dubious honor of being on the "least generous list".   There wasn't a single Wisconsin County that made the list of "50 Most Generous Counties".

 

For Counties with 10,000 + tax returns, Brown and Winnebago counties made the Chronicle's list of "50 Least Generous counties" in the nation.   For Counties with 1,000 - 9,999 returns, Trempeleau, Iowa, Oneida, Green, Oconto, Sauk, Lincoln Counties were given the same distinction. For counties with 100-999 returns, Forest, Taylor, Sawyer, Rusk, Washburn received the dubious honor of being on the "least generous list".   There wasn't a single Wisconsin County that made the list of "50 Most Generous Counties".

 

So what's going on here? Frankly I was surprised by the data, so I shared this analysis with colleagues that offered the following potential explanations which I've examined in this issue:

 

 

The first hypothesis offered is that perhaps Wisconsin residents feel that our governmental sector is providing services that are being provided by the nonprofit sector in other states. Additionally, these same residents may feel that they are "doing their part" by paying higher taxes. I see three problems with that argument. First of all, if Wisconsin taxes are higher then other states, there is a financial incentive to increase charitable giving. Most of the research which has examined changes in the tax code have concluded that when you reduce the financial incentive to give, charitable giving decreases. Secondly, other states that are perceived to have a high tax rate to support public services do not appear to show the same results. For those interested in examining other high income tax states, The Maryland Budget and Tax Policy Institute has ranked states based on their combined highest state and local income taxes (See: http://www.taxpolicycenter.org/taxfacts/state/combined.cfm ) . Wisconsin ranks 21st in that particular ranking, while Minnesota ranks even higher at number 13. Minnesota residents give a higher percentage of their income to charity then Wisconsin residents and they have 3 counties that make the Chronicles lists of "50 Most Charitable Counties in the Country" (compared to 0 for Wisconsin). Only 3 Minnesota Counties show up on the lists of 50 Least Charitable Counties in the Country (compared to 14 for Wisconsin). And finally, the Chronicle of Philanthropy examines charitable giving as a percentage of discretionary income which is what is left over after paying living expenses (including taxes).

For a copy of an Excel Worksheet that allows you to do an analysis of other Wisconsin Counties and includes data on charitable giving and County income, see: http://www.uwex.edu/ces/cced/documents/philanthropy_WI2.xls    

 

This Excel worksheet includes data from the Census and the Chronicle of Philanthropy study.

Another theory that has been shared with me is that perhaps Wisconsin residents tend to volunteer their time more then they volunteer their money. Research by Independent Sector however, has shown that households in which a respondent volunteered, also gave substantially more than households in which the respondent did not volunteer. For giving households, the average contributions were $2,295 from volunteers and $1,009 from non-volunteers (See: Giving and Volunteering in the United States, Independent Sector, 2001, http://www.independentsector.org/

PDFs/GV01keyfind.pdf ).

The research by the Chronicle of Philanthropy identified an important trend that has been supported by numerous others: 78% of charitable giving by individuals goes to religious organizations.

 

For itemized tax returns, the Chronicle determined that they gave approximately 6.4% of their discretionary income to charity, but 5% of that average giving went to religious organizations. Are Wisconsin residents any less likely to belong to a religious organization then the typical American? Again the answer seems to be "no". The data seems to suggest that Wisconsin residents are more likely to be affiliated with a church then the average U.S. population

 

* "Adherents" is a term used to describe adult members and their children. Some churches do not report children as members and an adjustment was made for some religions to factor in children

Finally, I have heard one last argument that says we ought to simply focus on building the local economy and that if we could strengthen the economy and build wealth, people would have more money to give to charitable organizations. While it is true that the wealthiest segment of the population provides most of the charitable giving, when analyzing charitable giving as a percentage of disposable income, there appears to be a reverse correlation between income and charitable giving. The higher the income, the lower the percentage of discretionary income that is dedicated to charitable giving.

 

PERCENTAGE OF DISCRETIONARY INCOME GIVEN TO CHARITY, BY INCOME

 

Discretionary income

Religious giving as a percentage of discretionary income

Other giving as a percentage of discretionary income

All giving as a percentage of discretionary income

All

$9,103

5.0%

1.4%

6.4%

Less than $15,000

­$7,232

*

*

*

$15,000-$29,999

­$1,886

*

*

*

$30,000-$49,999

$5,154

6.9%

2.0%

8.9%

$50,000-$69,999

$12,482

4.3%

1.3%

5.6%

$70,000 or more

$38,585

2.6%

0.8%

3.3%

 

* Annual expenses exceed reported net income for these income levels; percentage cannot be calculated.

Source: The Chronicle of Philanthropy, May 1 ,2003 , "How Americans Give"

 

Although the wealthiest segment of our population gives a lower percentage of their discretionary income, those making more then $50,000 a year provide about 80% of the total charitable giving in this country.

 

Thus, increasing wealth within the state through economic development would undoubtedly have a positive impact on the nonprofit sector, but the data still seems to suggest that Wisconsin residents are less charitable than the rest of the country while having average incomes.

 

So what does all this mean for my community?

 

•  Sharing information on charitable giving in public forums might encourage individuals to re-examine their past practices and to examine the needs for philanthropy within the community. If the same group of Wisconsin residents that made more then $50,000 and filed an itemized tax return (This sample is estimated to represent only 18% of the U.S. Taxpayers) contributed the national average of 6.4% of discretionary income, charitable organizations would have received an additional $35.5 million dollars. If we accept the premise posed by the Chronicle of Philanthropy that this group donates 80% of the nation's total, we could increase that estimate to $44.4 million for the State of Wisconsin (For an analysis of this impact at the County level, download the Micorsoft Excel worksheet from the CCED web site).

County

Ave. charitable donation

Potential calculated at national ave. of 6.4% of discretionary income

Growth potential for itemized tax returns in this County

Estimated growth potential for all residents in County

Brown

$2,441

$3,001

$13, 285,854

$16,607,317

Dane

$3,055

$2,681

($19,355,412)

($24,194,265)

Forest

$1,486

$3,151

$428,014

$535,017

Jackson

$4,771

$2,944

($1,326,263)

($1,657,828)

Taylor

$1,740

$3,003

$1,143,080

$1,428,850

Waukesha

$2,664

$2,997

$21,068,570

$26,335,712

 

•  Communities need to determine if they have sufficient vehicles for encouraging philanthropy within the community. According to the "Wisconsin Giving Report 2003" published by the Wisconsin Donors Forum ( http://www.dfwonline.org/pdf/WIGivingReport3.pdf ), Wisconsin leads the nation in the number of active community foundations (35) and growth in the number of community and family foundations. While community foundations in Wisconsin provide grants to all 72 counties, there are still many communities that are not directly served by a community foundation. The donors forum concludes that community foundations are the principle source of private funding for rural Wisconsin Communities. Given that fact, we may have a need for a state-wide community foundation that could serve as a fiscal agent for community funds or for start-up foundations.

•  Nonprofits need educational training and assistance on topics such as resource development, grant writing, marketing, and planned giving.

•  People who start volunteering in their youth, are twice as likely to volunteer as adults than those who did not volunteer when they were young. In every income and age group, those who volunteered as youths give and volunteer more than those who did not.   (Source: Source: Engaging Youth in Lifelong Service , Independent Sector & Youth Service America, D.C.). More than half of American public high schools and a growing number of colleges, now require service as a condition for graduation. What are your schools, and youth serving organizations doing to encourage philanthropy, volunteering, and service learning?