The Star-Spangled Giver: charitable giving in the USA

usa flagThis week has seen the launch of a fascinating special report by the Chronicle of Philanthropy, entitled “How America Gives”. This is an incredibly detailed look at patterns of charitable giving across the US, and is presented in a great interactive format that allows users to compare trends against a whole range of factors and compare geographic areas by state, city or even zipcode.

 

Unsurprisingly this has meant a flurry of media attention across the US, as national media latch onto stories about political and religious trends and local media take the opportunity to run the obvious “why is our town so generous/stingy and why is [hated local rival] so much better/worse?” stories.

 

As someone who works for an organisation that produces the UK’s most comprehensive annual study of charitable giving trends (CAF and NCVOs’ UK Giving), it is fascinating to look both at the methodology and findings of this new US report. Methodologically, there is one huge difference between UK Giving and How America Gives: the former is based on a sample survey, with overall trends reached by extrapolation, whereas the latter is based on actual information from individual tax returns filed with the IRS. This difference is entirely one of necessity- it would be great to be able to base UK Giving on exact figures for how much each person gave identified through their tax returns but unfortunately this is not possible in the UK at present.

 

The way that our tax system operates, even if one had access to all the returns that were filed it would not tell you that much about charitable giving patterns. For a start, the majority of people pay their tax via PAYE and don’t submit a separate return, and furthermore even where a return is filed not all giving would be captured. The only donations that would be apparent were those where a higher rate taxpayer is claiming back marginal rate relief through Gift Aid, or gifts of assets such as shares. And this would only be a tiny slice of the overall amount of giving.

 

Studying tax returns in the US can tell you a lot more about charitable giving, because the US system in which charitable donations are deducted from taxable income requires these gifts to be itemized on an individual’s tax return. However, this also highlights one of the possible limitations of the US study: it only captures tax-effective giving, i.e. only those gifts for which a donor has claimed a deduction. This is not necessarily a huge problem, as the use of charitable reliefs is pretty widespread in the US, but it is worth noting. Past debates about the US charitable deduction have highlighted the fact that it is biased towards the better-off in society because they are more likely to be itemizing taxpayers (in particular, the ownership of property with a mortgage makes a person far more likely to submit an itemized return, so those less well-off who cannot afford to buy property are excluded). This means that there is potentially a segment of society whose giving behaviour is not being captured if the data source is tax returns. Of course, with a survey-based report such as UK Giving this problem does not occur because you can ensure that the sample is representative in terms of demographics and income.

 

This just demonstrates that there are advantages to both approaches, and that what we gain through the certainty of basing findings on exact figures from tax returns may be counterbalanced by the risk of missing out certain groups of donors as a result.

 

Away from the methodological questions, the report throws up some fascinating trends that are examined in a number of accompanying analysis pieces. I want to look briefly at three of the areas that I think are particularly interesting.

 

Religion & Giving

Mirroring findings from many other reports (REF), How America Gives found that faith appears to play an important part in determining levels of giving. According to the report, people in more religious areas of the US give a higher proportion of their discretionary income to charity: roughly 5.2% in the highly religious southern states compared to 4% in the more secular north east states. The interesting thing, however, is that if you strip out giving to religious causes the picture changes dramatically and the north east states are the most generous. This demonstrates the huge role that religion and religious organisations play in the landscape of charity and charitable giving in the US. It is always important to bear this in mind when attempting to draw comparisons with the UK, particularly when considering where the donations actually go. As Rob Reich of Stanford University has pointed out, the majority of US giving goes to religious causes but little of this actually filters through to traditional charitable activity (only somewhere on the order of 5%); the rest is spent on sustaining the religious organisations themselves.

 

Politics & Giving

Just in case bringing religion into the debate wasn’t likely to spark enough argument, How America Gives also compares giving with reference to political affiliation. The authors chart the percentage of discretionary spending that is given to charity in each state against how that state voted in the 2008 Presidential election. This shows that republican states are overwhelmingly more generous in terms of giving than Democrat ones. Of course, there is a very obvious danger here of mistaking cause for correlation and drawing unfounded conclusions. Whilst there may potentially be some interesting hypotheses one could put forward about differing views of the relationship between philanthropy and the State amongst Republicans and Democrats, it is also true that there is a pretty strong correlation between religion and political affiliation at the level of states in the US. Many of the republican states are also the most religious, so it is difficult to disentangle the effect of this factor.

 

With the proviso that one has to be very careful about drawing any firm conclusions, this link between political affiliation and generosity would be one I would be interested in seeing explored in the UK. Would the results mirror those in the US, with Tories giving more as a percentage than Labour or Lib Dem supporters? Who knows, but I would imagine it would spark some fairly heated debate… (Although it’s probably worth remembering, as one of my American friends often reminds me, that even a lot of democrats would be fairly right-wing when viewed from a UK perspective!)

 

Wealth & Giving

Having done religion and politics, the obvious next step would be for the report to look at sex. However, failing that the authors have done the next best thing and looked at wealth. (Which is possibly more contentious in today’s world anyway- and certainly from a British perspective…) The report backs up the oft-repeated assertion that the wealthy give less as a proportion of their income than those with less money, finding that households with an income of between $50K and $100K give 6% of discretionary income while those with an income of $200K+ give only 4.2%. As is always the case when considering this statistic, the authors are careful to point out that wealthy still give more in real terms and account for a disproportionate amount of total giving ($200K+ households represent 11% of tax returns but 41% of total donations).

 

What is perhaps more interesting is what the report concludes about the differences between wealth in different areas. Because it gets down to the level of zip codes, it is able to conclude that wealthy people who live in enclaves, where they are segregated from those less well-off than themselves, give substantially less (only 2.8%) than those who live in more mixed areas . There appears to be a clear case of “out of sight, out of mind” here, where wealthy people who are more disconnected are less motivated to give to charity because they are not as aware of the needs of others.

 

There is (excuse the pun) a wealth of fascinating information in the study, and I recommend playing around with the interactive tool. Perhaps in the future we will be able to do postcode-level comparison of giving patterns in the UK (along the lines of the rather wonderful Postcode Wars website), although that seems some way off at the moment. I’ll leave you with what, to my mind, might actually be the most startling fact in the Giving in America report, which hasn’t really received that much attention: on average, US donors who submit tax returns give 6% of their discretionary income to charity. That’s 6%. Even given the distorting effect of religious giving and areas where tithing is the norm, that’s setting the bar pretty high for any of us who are trying to gee up the culture of giving here in the UK!

 

Rhodri Davies

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