The divide between the rich and not-so-rich in America can be seen most glaringly in the amount of money they give (and have stopped giving) to charitable causes.
Some food for thought this #GivingTuesday, which falls on Nov. 27, after both Black Friday and Cyber Monday. The average American household is giving far less to charity than it did a decade ago, but this hides two vastly different patterns of charitable giving. Over the past 10 years, charitable giving deductions from lower-income donors have declined significantly, at almost the same rate that charitable giving from higher income donors increased.
In the early 2000s, households earning $200,000 or more made up only 30% of all charitable deductions. By 2017, this group accounted for 52%. And the percent of charitable deductions from households making over $1 million grew from 12% in 1995 to 30% in 2015., according to a study of tax filings by the Institute for Policy Studies, a left-wing think tank.
As a result, charities are increasingly relying on larger donations from smaller numbers of high-income, high-wealth donors, which could lead to undue influence of funds in major charitable organizations. And they are receiving less from the vast population of donors at lower and middle-income levels. (The authors consider low and mid-range donor income as under $100,000 per year.)
“There has been a marked increase in mega-gifting,” the study said. In 2012, the threshold for mega-gifts was $50 million or more. Gifts of that size amounted to $1.2 billion and accounted for just 0.5% of all individual giving in the U.S. that year. In 2017, the threshold for mega-gifts jumped to $300 million or more, totalling $4.1 billion and accounted for 1.5% of all individual giving that year.
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The number of donors giving at typical donation levels has been steadily declining. Low-dollar and mid-level donors have declined by about 2% each year for more than 15 years, the study said. “These donors traditionally have made up the vast majority of donor files and solicitation lists for most national nonprofits since their inception,” it added. (In terms of donations, below $10,000 is considered a low to mid-range gift, while over $10,000 is considered a high-dollar gift.)
These are the people who have traditionally made up the vast majority of donor files and lists for most national nonprofits since their inception. This rate of decline “correlates strongly” with overall economic indicators, such as wages, employment and home-ownership rates, the researchers said.
Plus, more giving is going into warehousing vehicles like foundations and donor advised funds, instead of to charities on the ground, it added. The funds held in private foundations grew 62% between 2005 and 2015, while the number of private foundations chartered in the U.S. grew 21% over that same period.
Read: 5 ways giving your money away will make you happier
It’s not all doom and gloom: Giving to schools and colleges is expected to grow by approximately 6% annually, according to a separate report released in 2016 by the Indiana University Lilly Family School of Philanthropy and presented by Marts Lundy, a fundraising and philanthropy consulting firm based in Lyndhurst, N.J.
But middle-class parents of children in those schools and middle-income graduates likely had less to do with this spike too. “This may be due in part to the increasing interest of donors, and especially wealthy donors, foundations and even corporations, in funding higher education, as well as a growing role for philanthropy in K-12 education,” that report added.
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