Boston Globe(George McCully is creator of the Massachusetts Catalogue for Philanthropy and the Generosity Index, and is trustee of the Ellis L. Phillips Foundation.)
Author: By George McCully
Date: 04/14/2002
Page: C3
Section: Business
Nearly 1.5 million Massachusetts taxpayers (over 40 percent) for the first time are being modestly rewarded by the state's new tax deduction for their 2001 charitable giving - which collectively has enhanced the quality of life of virtually everyone in the state.
In the 2000 election (only 18 months ago), this tax incentive was demanded in a ballot referendum by 72 percent of the voters - the largest majority on any ballot question that year - after the Legislature had repeatedly, for years, buried it in committees. The voice of the people was clear, and the reason is obvious: We all will benefit from it, increasingly as our giving grows, year after year.
Nonetheless, a few Beacon Hill lawmakers are considering rescinding this beneficial taxpayers' incentive, to save a few dollars for our troubled budgets.
The Catalogue for Philanthropy, which promotes charitable giving through donor education, and the professional philanthropic community welcome this debate as a teaching opportunity to illuminate the benefits of philanthropy for everyone, and to correct some common but fundamental misunderstandings about the relationships between government and philanthropy, and between taxes and charitable giving as instruments of public policy.
To begin with the basics: philanthropy is "private initiatives for the public good, focusing on quality of life," whereas government is "public initiatives for the public good, focusing on law and order." Both work for the "public good," but by complementary means: philanthropy - giving time or money - is voluntary, each donor deciding what to support; paying taxes is required - the government deciding how to spend it, so that almost all is spent on government itself and only a tiny fraction pays charities for public services.
The appropriate relationship between government and philanthropy is partnership, each doing what it does best, for the public good. Since neither one, nor both together, can ever fully meet society's needs, they cooperate for the greatest efficiency and productivity. The philanthropic tax incentive is a prime example of both the partnership and the complementarity - using taxes to leverage charitable giving at a highly efficient ratio in Massachusetts (for every $17 donated, $1 is deducted from personal income taxes).
This incentive will be beneficial for Massachusetts because it is aimed precisely at the number one issue in philanthropy today, which is the extreme disparity between our low charitable giving and our high income. Our charities are among the best in the nation, our participation in volunteering and giving are relatively high. Only in levels of giving do we lag the rest of the country, and there we have a huge opportunity, because our capacity to give is the third highest.
Charitable giving is what economists call price-elastic, which means that while very few people give solely to gain a tax deduction, many donors consider tax advantages when deciding how much to give because the incentives reduce the cost of gifts by the amount that would have been paid in federal and state taxes on the dollars given.
Long and broad experience confirms this: The federal government initiated the incentive in 1917, and 34 of the 41 states that have income taxes also have philanthropic tax incentives, with positive results; those that do not have them rank at or near the bottom in charitable giving, Massachusetts among them.
The philanthropic tax incentive is not a cure-all, but it is an essential cog in a large system being erected to remedy this fundamental problem. Everything we do to increase charitable giving will be enhanced by this one additional incentive. Legislators concerned with short-term, tactical, fiscal repairs should not tamper with long-term, strategic, and financial instruments instituted for excellent reasons by a large majority of the electorate.