What should governments do when charities plead poverty?

TheRecord.com – opinion/columns
June 13, 2013.   By Peter Shawn Taylor

Long thought invisible and insignificant, federal Conservative backbenchers are suddenly much in the news.

Last week, Edmonton-area Conservative MP Brent Rathgeber resigned from caucus after he was unable to convince his government colleagues to adopt his version of a federal sunshine law.

At the other end of the spectrum, Kitchener-Waterloo MP Peter Braid has been basking in near-universal praise for his success in actually changing federal tax policy.

Braid is credited with the new First Time Donor’s Super Credit, which will nearly double the size of the federal tax credit for anyone who hasn’t given to charity since 2007. Donations up to $1,000 will get a one-time tax break of more than $500.

For this our local MP got two mentions in the 2013 federal budget — one more than boss Stephen Harper. A few weeks ago, Finance Minister Jim Flaherty came to town to reannounce the change alongside Braid. He also earned an appreciative editorial from The Record plus effusive praise from charity leaders.

As the life of a backbencher goes, this is as good as it gets.

But while the charitable sector is responsible for much good work in Canada, when it goes looking for taxpayer assistance through policies such as a super credit it deserves as much scrutiny as any other group.

Since the Great Recession of 2008, charities have loudly complained of a crisis of falling donations. Yet donations are rising again and, at $8.5 billion (in 2011), have nearly reached their pre-crash peak of $8.6 billion.

It seems reasonable that the charitable sector will continue to recover in step with the economy, without Ottawa doing anything.

The new credit will also add to the complexity of Canada’s tax system, which is burdened down by a maze of other dubious tax credits unleashed by the Harper government for political reasons. These tax expenditures come out of taxpayers’ pockets the same way direct budget spending does, but never get the same scrutiny.

Plus, charity experts don’t even believe a bonus tax credit for first-time donors will have the desired effect. Abigail Payne is a McMaster University economist who studies why and how people donate. She says she’s “skeptical” Braid’s efforts will make a difference.

“The assumption (behind the super credit) is that if you give once, you’ll continue to keep giving forever,” says Payne. But there’s no reason to believe this to be the case. She notes it could simply become an extra tax break for people who would have given regardless.

But the biggest issue that arises from Braid’s new policy is the assumption that if charities have a problem, it’s up to government to fix it.

Last year, prompted by Braid’s earlier efforts, the House of Commons asked charities across the country for advice on tax credit policy. The result was rather predictable.

The Canadian Council of Christian Charities wanted the top tax credit raised to 42 per cent from 29 per cent. The Change Canada Charitable Foundation wanted to put it at 100 per cent (making all donations essentially free). The Canadian Diabetes Association wanted a bigger deduction for donations over $500. The TD Bank wanted to improve the tax treatment of donations of shares in privately held companies. Et cetera.

The universal solution from charities to the so-called donation crisis was for Ottawa to make donations cheaper, at taxpayer expense. But putting charities on the dole doesn’t improve the charitable sector. It makes them lazy.

Payne’s work reveals that the more governments assist charities, the less interested charities become in doing the hard work of dealing with individual donors. Every dollar of government funding to charities actually lowers private fundraising results by between 80 cents and 98 cents.

There’s a local example of this scenario in the situation of Opportunities Waterloo Region. This anti-poverty group (most notable for its pointless and failed crusade promoting a living wage for Region of Waterloo employees a few years ago) has always relied on grants for its budget. Only when regional funding was sharply reduced this year did the organization roll out a campaign asking for public support.

If there is a crisis in the charitable sector, it should be up to charities themselves to try to fix the problem first before coming to government pleading poverty. And they could start by doing a better job proving to the public that their efforts are both useful and necessary.

Anyone looking for more detail on the “real” charity crisis and what to do about it should get the provocative 2012 book With Charity for All: Why Charities are Failing and a Better Way to Give, by Ken Stern, the former chief executive officer of National Public Radio in the U.S. Stern argues convincingly (using several Canadian examples) that charities should act less like government dependants and more like private corporations by rigorously identifying needs, building internal capacity and measuring outcomes.

Yet even when it comes to the new super credit, it seems everyone still expects government to do all the work.

“Why isn’t the charitable sector out there telling everyone about this new program?” Payne asks with some frustration, observing that Ottawa is alone in promoting the new policy.

Too many charities think it’s the government’s job to keep them in business.

Peter Shawn Taylor is editor-at-large of Maclean’s. He lives in Waterloo.

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