How to make Canadians give more to charity – Opinion/Comment – How to make Canadians give more to charity
Published On Fri Dec 11 2009.   By Carol Goar Editorial Board

As Christmas approaches, cash-strapped charities are sending out their appeals thick and fast. They need a burst of seasonal generosity to mitigate a punishing year.

But many Canadians don’t have much to give. The recession has hit them hard, too.

Current statistics for charitable donations aren’t available. But a mid-year survey by the Social Planning Network of Ontario showed that its members were grappling with a 61 per cent annual drop in personal and corporate donations.

To protect their clients, these charities had asked their workers to take pay cuts, increased the hours of their volunteers, depleted their contingency reserves and ramped up their fundraising. But they still couldn’t meet the rising need.

With just 20 days left in 2009, all charities can do is hope that Canadians dig deep over the holidays, despite their financial woes.

But Ottawa could help make future years brighter, says economist Abigail Payne in a paper just published by the business-sponsored C.D. Howe Institute.

Payne, who teaches at McMaster University and holds the Canada Research Chair in Public Economics, lays out two scenarios that make it more attractive for small donors – whose numbers have fallen off sharply in recent years – to support worthwhile causes.

To put her proposals in perspective, here are the current rules: An individual who donates up to $200 to any registered charity is eligible for a federal tax credit of 15 per cent (plus a 6.05 per cent provincial tax credit in Ontario). Contributions above the $200-mark qualify for a 29 per cent federal credit (plus 11.6 per cent in Ontario).

Numerous studies have shown that these measures don’t induce most people to give. But a survey of donors, done by Statistics Canada two years ago, found that half would do more if the tax credits were better.

So Payne, tapping into her knowledge of tax law and charities, designed two options that would motivate Canadians to give more.

Possibility 1: Get rid of the existing two-tier system and make all charitable donations eligible for the 29 per cent tax credit.

This would cost Ottawa approximately $110 million in foregone taxes. But it would induce those who don’t report charitable donations – three-quarters of taxpayers – to file a claim and it might foster a culture of giving.

Possibility 2: Turn the current incentive system upside down, offering the highest tax credit for the first dollar given. This would recognize the generosity of small donors and encourage more Canadians to give.

The cost of this proposal would depend on the size of the credit and the way it was structured. Payne does not offer a precise formula. More analysis and discussion are needed, she says. For illustrative purposes, she calculates that an enriched credit of 40 per cent on donations up to $500 would reduce federal revenues by $280 million. But it would broaden the donor base and reduce the sector’s reliance on wealthy philanthropists.

Over the past decade, the Liberals and Conservatives have changed the country’s tax laws substantially to encourage charitable gifts of publicly traded shares, mutual funds, life insurance policies and works of art, at a cost of $56 million in foregone revenues. Now the leaders of the large non-profit institutions that reaped the windfall are lobbying the government to include gifts of real estate and private company shares.

In the same period – in fact, since 1987 – Ottawa has done nothing significant to improve the tax treatment of cash donations.

The result: Affluent donors are giving more to universities, hospitals and high-profile cultural organizations. Middle-income donors, who typically support the charities that help their neighbours, are giving less. And Canada is becoming a harsher, chillier place.

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