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Does charitable giving help the poor?

Does charitable giving help the poor?

Dylan Matthews looks at charitable giving in the US and finds that only a third of all giving actually goes to the poor.

It’s not just that the only people who itemize on their tax returns get to deduct their charitable giving, it’s that most of the actual dollars go to people who are not poor.


Writing on Washington Post’s WonkBlog, Matthews looks at charitable giving from a variety of angles. One study he cites is the University of Indiana’s Center for Philanthropy 2007 study of giving in 2005.

The assumptions of the report are quite generous to givers. For example, when faced with donations that partially benefited poor people but also helped the non-poor (for example, donations to hotlines that get calls from people across the income spectrum), they counted half the donations as donations to the poor. But even so, the report found that only about a third of donations in 2005 were targeted at helping the poor:

google_poordonations_piechart.png

Particularly startling is that even when you lump in international aid to the poor (and, of course, the poor in developing countries are much worse off than the poor in developed country) with all miscellaneous donations to help the poor, it’s still less than 5 percent of all donations.

Now, maybe helping the poor isn’t the only, or even the main purpose of the charitable deduction. Maybe part of being a liberal society that tolerates a variety of religious traditions is giving religious people tax breaks on what they give to their churches. Maybe donations to higher educational institutions, even donations that are poorly disguised bribes to get the donors’ children admitted, are worth subsidizing.

But regardless of its other merits, the deduction’s distributive argument seems pretty clearly regressive.

Matthew’s conclusion that charitable deduction is essentially regressive because it’s only open to the relatively wealthy and benefits mainly the non-poor.

From a taxation perspective, I guess, this argument makes sense. But does the idea of allowing tax-payers to deduct contributions reflect an alternative to the society lining up values and social good in a way other than direct policy?

So, here’s my question: is the point of charitable giving simply to help the poor?

Or is ir that the deduction allows people to use money that might otherwise go to taxes go to things that the society values but which might not be funded by taxes? So if the society values education and also values education that is “private” or non-governmental, then using the tax-deduction to allow people to choose whom to support such education might make sense. The same can be said for the arts, for religion, for health, and for charities that care for the poor.

In a society that promotes freedom of expression, allowing tax-payers to choose to support their local arts center instead of paying a little more in taxes, allows us to fund a societal value without direct funding from government.

In a society that does not establish religion, but values spirituality, we allow people to support the faith group of their choice.

Now many of these same groups also receive direct government funding for specific programs in the form of grants or participation in governmental programs–especially in higher education ad in healthcare–but these not only come with considerable strings but also (in theory) promote a specific governmental program that (again in theory) has been decided by Congress.

So is Matthews right? Is the charitable deduction giving a regressive tax-policy in terms of its outcomes? Or is the essential purpose of charitable giving perhaps broader than that?

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Erik Campano

Matthew, that's the Hoover Institution. It's a conservative think-tank. I know, because I went to the university it's affiliated with. I don't trust their data on the price of milkshakes, much less on such a fuzzy question of whether people are charitable are not.

I googled. Here's the opposite argument.

Furthermore:

a) You've got a cause-correlation problem. Even if religious people give more to charity, it doesn't mean that religion causes people to be more charitable. There could be a third variable influencing both (I think there is).

b) I frankly have no idea how one would be able to measure "charitability" anyway. How much money you give out is a tiny bit of that. My grandma's superintendent takes care of everybody in the building like they're his family. Cooks meals, fixes broken stuff, listens to your problems, all for free. He's one of the most charitable people I know. But I don't think he's ever given any money to, like, the Red Cross or Episcopal Relief and Development.

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Laurel Cornell

Matthews mistakes the purpose of the charitable deduction to 501(c)3 organizations. The purpose is NOT to serve the poor. The purpose is to provide services which cannot be provided either by governmental organizations or by profit making organizations. That is, services which not everyone in the US is willing to support via their taxes and services which do not make a profit. For example, opera companies. Hence nonprofits / NGOs do many many different kinds of things --- support environmental causes, LGBTQ activities, the arts --- some of which may support the poor and some of which have nothing to do with poverty at all.

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Matthew Buterbaugh+

Really? We don't have evidence of that? I've read many articles of studies to that affect - on this site, in fact.

Here's one that a simple Google search produced.

www.hoover.org/publications/policy-review/article/6577

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Erik Campano

Sure, Paul, you're right, clergy don't pay taxes. But what doesn't jive here is that donors to the church get a tax deduction on money which pays such a high salary to its priests. The Bishop of New York does not need $300,000 a year. Families in Harlem, a few blocks from his office, get by on 1/10 that salary.

The head of the entire Salvation Army makes $94,000 a year.

Matthew, good points, especially #3. If you actually take the time to talk to homeless people -- or end up homeless (like I did once) -- you learn how much good a direct donation to a beggar can do.

I do have to challenge you on the statement that churches "form people to be more charitable". We don't have empirical evidence for that.

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Matthew Buterbaugh+

I have three thoughts on this:

1. Charitable giving to houses of worship does support an institution that supports a lot of volunteer efforts that cannot be measured in dollars. They also form people to be more charitable, so we could consider that an investment.

2. Not all non-profits exist to benefit the poor. They simply have different missions: i.e: public radio exists to inform, educate and entertain. This is not a problem, it's just what they do.

3. If we are really troubled by a charitable organization's administration costs, perhaps we should do some soul-searching. Jesus told us to give up what we have and give it to the poor. He did not say give it to "X Org". These institutions effectively exist because we either don't trust our own judgment to discern right use of our money, or to put a buffer between us and the needy. It's much easier to tell a person who begs that we give to a homeless shelter than to buy him/her lunch. Perhaps if we're really bothered by only a quarter of our givings going to help those in need, we should be charitable in ways that don't have a tax write off.

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