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A Nation of Givers

From the March/April 2008 Issue

Americans are remarkably charitable. But what sorts of people give the most? And how do we compare with the Europeans?

Q. How much do Americans give? Is the amount we give going up?
A. In 2006, Americans gave about $295 billion to charity. This was up 4.2 percent over 2005 levels, and charitable giving has generally risen faster than the growth of the American economy for more than half a century. Correcting for inflation and population changes, GDP per person in America has risen over the past 50 years by about 150 percent, while charitable giving per person has risen by about 190 percent. That is, the average American family has gotten much richer in real terms over the past half century, and charitable giving has more than kept pace with this trend. 

Donations by Americans- 2006-2.jpgQ. So where do the donations go?
A. A large majority of U.S. citizens donate money each year to houses of worship and charitable organizations. Most estimates place the percentage of American households that make monetary contributions each year at 70 to 80 percent, and the average American household contributes more than $1,000 annually. But it is not the case that American giving goes entirely—or even mostly—to religious institutions. About a third of individual gifts go toward sacramental activities, primarily supporting houses of worship. The rest goes to secular activities, such as education, health, and social welfare.

Q. Are Americans more or less charitable than citizens of other countries?
A. No developed country approaches American giving. For example, in 1995 (the most recent year for which data are available), Americans gave, per capita, three and a half times as much to causes and charities as the French, seven times as much as the Germans, and 14 times as much as the Italians. Similarly, in 1998, Americans were 15 percent more likely to volunteer their time than the Dutch, 21 percent more likely than the Swiss, and 32 percent more likely than the Germans. These differences are not attributable to demographic characteristics such as education, income, age, sex, or marital status. On the contrary, if we look at two people who are identical in all these ways except that one is European and the other American, the probability is still far lower that the European will volunteer than the American.

People who give to charity at least once per year are twice as likely to donate blood as people who don’t give money.

Q. Do Americans mostly give because our tax system rewards it?
A.The U.S. federal government and state governments make monetary gifts to public charities tax deductible. So if a taxpayer gives $1,000 and pays a tax rate of 35 percent on her last dollar of income, her donation saves her $350 in taxes.

The amount of taxes not paid because of donations is huge: it represents the single largest government “matching grant” program ever. The Internal Revenue Service estimates that in 2002, individuals donated and deducted $142.4 billion in monetary and in-kind gifts. Breaking this figure down by income class and applying 2002 marginal tax rates for these classes, we can estimate that this represents foregone income tax revenues—and hence a government subsidy to nonprofit organizations—of about $37.2 billion.

Still, tax deductibility is actually irrelevant for most people. IRS records show that only about a third of people who file tax returns itemize their deductions—which means that most Americans (particularly middle- and lower-income citizens) don’t even claim the deductions to which they are entitled. Even among households earning over $120,000 per year, only about 40 percent itemize their deductions. Furthermore, research shows that virtually no one is motivated meaningfully to give only because of our tax system.

Q. Monetary giving doesn’t tell us much about total charity, does it? People who don’t give money probably tend to give in other ways instead, right?
A. Wrong. First of all, there is a bright line between people who give and people who don’t give. People who do give time and money tend to give a lot of it. According to the Center on Philanthropy, the percentage of givers donating less than $50 to charity in 2000 was the same as the percentage giving more than $5,000. Similarly, the same percentage of people who only volunteered once volunteered on 36 or more occasions in 2000.

Second, people who give away their time and money to established charities are far more likely than non-givers to act generously in informal ways as well. For example, one nationwide survey from 2002 tells us that monetary donors are nearly three times as likely as non-donors to give money informally to friends and strangers. People who give to charity at least once per year are twice as likely to donate blood as people who don’t give money. They are also significantly more likely to give food or money to a homeless person, or to give up their seat to someone on a bus.

Giving among religious versus secular people-2.jpgQ. We often hear that religious people give more to charity than secularists. Is this true?
A. In the year 2000, “religious” people (the 33 percent of the population who attend their houses of worship at least once per week) were 25 percentage points more likely to give charitably than “secularists” (the 27 percent who attend less than a few times per year, or have no religion). They were also 23 percentage points more likely to volunteer. When considering the average dollar amounts of money donated and time volunteered, the gap between the groups increases even further: religious people gave nearly four times more dollars per year, on average, than secularists ($2,210 versus $642). They also volunteered more than twice as often (12 times per year, versus 5.8 times).

Very little of this gap is due to personal differences between religious and secular people with respect to income, age, family, or anything else. For instance, imagine two people who are identical in income, education, age, race, and marital status. The one difference between them is that, while one goes to church every week, the other never does. Knowing this, we can predict that the churchgoer will be 21 percentage points more likely to make a charitable gift of money during the year than the nonchurchgoer, and will also be 26 points more likely to volunteer.

Q. But aren’t they just giving to religious charities and houses of worship?
A. These enormous differences are not a simple artifact of religious people giving to their churches. Religious people are more charitable with secular causes, too. For example, in 2000, religious people were 10 percentage points more likely than secularists to give money to explicitly nonreligious charities, and 21 points more likely to volunteer. The value of the average religious household’s gifts to nonreligious charities was 14 percent higher than that of the average secular household, even after correcting for income differences.

Religious people were also far more likely than secularists to give in informal, nonreligious ways. For example, in 2000, people belonging to religious congregations gave 46 percent more money to family and friends than people who did not belong. In 2002, religious people were far more likely to donate blood than secularists, to give food or money to a homeless person, and even to return change mistakenly given them by a cashier.

Q. How much do the rich in America give, compared with everyone else?
A. In order for a person to give money away, he or she must have it in the first place. Not surprisingly then, income and charitable giving in America are positively related. For example, in the year 2000, families earning $20,000 or less gave an average of about $450 to charity, while families earning more than $100,000 gave away an average of a bit more than $3,000. The top 10 percent of households in income are responsible for at least a quarter of all the money contributed to charity, and households with total wealth exceeding $1 million give about half of all charitable donations. The American rich are generous, on average. 

Low-income working families are the most generous group in America, giving away about 4.5 percent of their income on average.

Yet when we measure monetary giving as a percentage of income in order to ascertain the level of one’s “sacrifice,” we find a surprising result: it is low-income working families that are the most generous group in America, giving away about 4.5 percent of their income on average. This compares to about 2.5 percent among the middle class, and 3 percent among high-income families.

One common explanation for the fact that the working poor give so much is, not surprisingly, religion. The working poor tend to belong to congregations that are relatively literal about Biblical injunctions to give. Data from 2000 show that these poor American families were roughly twice as likely as middle-class families to be Seventh-Day Adventists, Pentecostals, or Jehovah’s Witnesses. They were also significantly less likely to belong to more “mainline”—and less stringent—denominations such as Episcopalian, Methodist, and Presbyterian.

Who gives the most in America: conservatives or liberals?
A. There is a persistent stereotype about charitable giving in politically progressive regions of America: while people on the political right may be hardworking and family-oriented, they tend not to be very charitable toward the less fortunate. In contrast, those on the political left care about vulnerable members of society, and are thus the charitable ones. Understanding “charity” in terms of voluntary gifts of money (instead of government income redistribution), this stereotype is wrong.

The fact is that self-described “conservatives” in America are more likely to give—and give more money—than self-described “liberals.” In the year 2000, households headed by a conservative gave, on average, 30 percent more dollars to charity than households headed by a liberal. And this discrepancy in monetary donations is not simply an artifact of income differences. On the contrary, liberal families in these data earned an average of 6 percent more per year than conservative families.

These differences go beyond money. Take blood donations, for example. In 2002, conservative Americans were more likely to donate blood each year, and did so more often, than liberals. People who said they were “conservative” or “extremely conservative” made up less than one-fifth of the population, but donated more than a quarter of the blood. To put this in perspective, if political liberals and moderates gave blood like conservatives do, the blood supply in the United States would surge by nearly half.

One major explanation for the giving discrepancy between conservatives and liberals is religion. In 2004, conservatives were more than twice as likely as liberals to attend a house of worship weekly, whereas liberals were twice as likely as conservatives to attend seldom or never. There are indeed religious liberals in America, but they are currently outnumbered by religious conservatives by about four to one.

Q. Aren’t people who favor social spending just as charitable as people who give money to charities?
A. It depends. Many Europeans feel that they “give” through their taxes, and in some European countries they have the high taxes and generous social welfare benefits to show for it. This argument doesn’t work so well in America, however, because we don’t have the same redistributive policies.

In America, $1 given privately tends to increase GDP by about $15—an excellent rate of return by any standard.

About 80 percent of American liberals say they think the government should “do more” to reduce income inequality, versus just 27 percent of American conservatives. This is another reason, besides religion, liberals in America give less than conservatives. For example, in 1996, people who believed the government should not take greater measures to reduce income inequality gave, on average, four times as much money to charity each year as those who believed the government should equalize incomes more. This result persists even after correcting for other demographics. It even holds for all sorts of nonmonetary giving. For example, people who stated in 2002 that they thought the government was “spending too little money on welfare” were less likely than those saying the government is “spending too much money on welfare” to give food or money to a homeless person.

Q. Why shouldn’t the government expand to cover our current charitable giving through taxes, as is done in Europe?
A. First, there is evidence that giving makes people happy. A number of studies have concluded that giving affects our brain chemistry. People who give often report feelings of euphoria, which psychologists have referred to as the “Helper’s High.” They believe that charitable activity induces endorphins that produce a very mild version of the sensations people get from drugs like morphine and heroin.

Second, there is evidence that private giving is implicated in economic growth. Per-capita charity and per-capita GDP in America have moved together over the years. Evidence that the two forces cause each other comes from an analysis of how past values of one variable affect future values of the other. This analysis shows that a 10 percent increase in current GDP per American would lead to a 9 percent rise in charitable giving. At the same time, a 10 percent increase in giving per person would provoke a 3 percent increase in GDP. Given the size of our economy, this means $1 given privately would increase GDP by about $15.

In sum, if we substituted our private charitable giving for government redistributive programs, we would pay a price in terms of economic growth, personal prosperity, and even happiness. Charitable giving should be seen not just as a nice detail about American life, and even less as a mere tax deduction. It should be seen as a national priority.

Arthur C. Brooks, a visiting scholar at the American Enterprise Institute and author of “Who Really Cares” (Basic Books, 2006), will publish two more books this year: “Social Entrepreneurship” (Prentice-Hall) and “Gross National Happiness” (Basic Books).

 

Chart sources: Chart 1- Giving USA Foundation; Chart 2- 2000 Social Capital Community Benchmark Survey, Roper Center for Public Opinion Research.

 

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