When I started this blog I decided to consult my number one giving inspiration; my dad. The man who introduced me to the New Haven soup kitchen, who first taught me how to count the coins in my tzedaka box, who gives money to support all of my fundraising efforts, my father is perhaps one of the most selfless people in my life. Naturally, I assumed such a veteran of giving could give me the breakdown on just about all the giving trends in America. Not only did I learn that it would take an entire think tank to provide me with this breakdown, but I also learned that I apparently still have the five-year-old’s conception that her father knows the answer to every question on the planet.
I unfortunately did not walk away from that consultation with a clearly mapped out vision of American giving trends, but I did walk away with my mind ever so slightly blown. See, during this consultation I naively asked my dad how much he would guess Americans on average give to charity. Responding that he has not a clue what the average percentage might be, Daddy did say that many people consider paying taxes the equivalent of giving to charity (tax money does go to the public service, after all), and therefore one could possibly argue that Americans give anywhere upwards of 15% of their income to charity. My first thought was that my dad was joking. Don’t people know that NGO’s provide services the government simply can’t, and that paying your taxes is just the duty of being an American citizen, not some selfless act coming from your innate love of giving? While I understand that very few people in the country can ever hope to give even 8% of their income to charity, I just couldn’t understand how this means it is okay to pretend that paying taxes makes up for the money that is not given? This is about the people who can afford to give, but consider their taxes to be a replacement for the money that otherwise would have gone to charity.
What about the inverse? What happens when people think that because they give to charity, they don’t need to pay their dues in taxes? This isn’t a hypothetical. It is the claim that many wealthier and right-leaning Americans have given to avoid paying their fair share in taxes.
And so I ask, are taxes in fact the equivalent of donations? What happens when we treat them as though they are in fact the same thing? The Chronicle of Philanthropy recently discussed this topic and told us that “wealthy people argue that they would give more to charity if they paid lower taxes.”
Statistics actually show that, counter intuitively, when taxes are lowered, people give less. This may have something to do with the fact that lower taxes result in less value in tax deductions from donations. Therefore there is less incentive to give to charity. When taxes are raised, however, people are more inclined to give because their donation goes farther in tax breaks. Essentially, you get more bang for your buck. It’s similar to the concept of a sale at a retail store- the more you spend, the more you get in savings.
Let’s consider now two situations. In scenario one, taxes are lowered, causing people to give less generously to charities. This results in a government with less revenue from taxes and therefore less able to serve the public and protect it. In scenario two, taxes are raised, causing people to give more in donations. In this scenario, we end up with a government with a larger budget and therefore more funds for public services, but we also benefit by having a more robust non-profit sector better built to serve the needs government can’t (such as programs for the homeless, environmental organizations, organizations that serve the hungry, etc.)
Obviously if we consider taxes and donations to the same exact thing, we won’t feel the need to give fully to both. But the problem is that they just aren’t the same. They serve different needs of this country and provide us with wholly different benefits. The government can’t provide for the cultural institutions that the NGO sector can, and NGO’s don’t provide us with police officers, firemen, and public transportation. We need both the government and the non-profits, and both sectors need our money to continue to serve us.