VI
BROADENING THE BASE
been developed In detail specifically for the Commission's con- sideration. In examining and weighing these, along with the existing charitable deduction itself, we have borne in mind a number of objectives—and we have ultimately recognized that no particular form of inducement will fully attain all of these objectives. Indeed, as we have gone through an extensive pro- cess of research, analysis and judgment, we have come to real- ize that there are some virtues and some shortcomings in all of the proposals examined, and that preferences among them must accommodate a variety of often competing consider- ations.
Objectives
These are the six objectives by which the Commission has weighed different kinds of encouragement to giving:
1. To increase the number of people who contribute significantly to and participate in nonprofit" activities.
The Commission's survey of taxpayers, described in Chapter II, indicates that giving and direct participation in nonprofit activities—volunteering—tend to go hand in hand. The Com- mission believes that the number of people who engage in either or both should be increased because of the benefits to society from nonprofit activities, including benefits to the par- ticipants in such activities. It is also important for the long-run health and stability of the third sector, the Commission feels, that as many Americans as possible give significant amounts of time and money to, and therefore have a direct interest in the durability of, nonprofit organizations and the nonprofit sector as a whole.
2. To increase the amount of giving.
As Chapter II notes, the level of giving by individuals has declined markedly in recent years as a proportion of personal income and of the gross national product. Chapter III describes how giving has declined even more steeply in purchasing pow- er, because goods and services for which contributions are used have gone Up in price more than the price level of the economy as a whole. Between declining relative amounts of giving and
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the exceptionally higher costs facing nonprofit organizations, it is estimated that the relative purchasing power of charitable contributions declined from 2 per cent of GNP in 1960 to 1.5 per cent in 1972, This level has undoubtedly fallen off even further since 1972, as giving itself has decreased, absolutely, in constant dollars.
In order to restore giving to its former level, an increase in contributions of one third would be needed, or around S8 bil- lion based on current giving levels. If such an increase stands as an upper goal for encouragements to giving, a minimum goal is suggested by estimates that giving will have to grow on the average by 11 per cent a year to maintain even its current reduced impact. This estimate is based on projections that the gross national product will grow, in undeflated dollar amounts, by 10 per cent a year for the foreseeable future and on expecta- tions that costs of nonprofit activities will continue to rise 1 per cent faster than costs in general.
A new base level of giving one third higher than at present in order to restore old giving levels and a continuous growth rate of 11 per cent simply to stand still pose no modest range of goals, considering that for the last five years giving has increased only 7 per cent a year on the average, or less than the rate of inflation. Yet the Commission feels that substantial goals must be pursued if an independent third sector is not to slowly erode away or become an adjunct of government be- cause of insufficient private support. Further, even the ambi- tious goals set forward here relate only to existing or past levels of giving. They may not be ambitious enough, because they do not take into account that many new groups with new pur- poses and new constituencies have, as observed earlier in this report, sprung up with new demands on the resources of phil- anthropy. Nor do they take into account ever-growing de- mands for the services of traditional philanthropic organiza- tions.
3. To increase the inducement to giving by those in low- and middle-income brackets.
Within the context of the progressive income tax, the cost of giving a dollar goes down as a contributor's tax bracket goes up. Whether this is inequitable or not can be, and is, argued,
• . . •• • '. •. • . - ' • ' 1 2 5 ' '' ' . • • • . : • •
and Chapter V summarizes the major sides of the argument.
But unquestionably the lower-income giver has less of an in- ducement to give than does the higher-income donor, and as a practical and political matter, this gives lower-income givers, who constitute a sizable portion of all citizens, less reason to give to and to feel a stake in the nonprofit sector. More than two thirds of all taxpayers, as noted, have no tax; inducement to give at all because it is less costly for them to take the standard deduction than it is to take the charitable deduction along with other itemized tax deductions. Thus, apart from considerations of equity, the Commission feels that widely unequal giving inducements create some risk to the continu- ance of any inducement at all, and to the giving induced. For this reason alone the range in inducements should be narrowed by raising the level of inducements to lower incomes.
4. To preserve private choice in giving.
Government currently influences giving through the tax sys- tem by determining what is or is not a tax-deductible cause and by setting percentage-of-income deduction limits. For giv- ing to provide a mode of individual expression and of citizen influence on the course of society and its institutions, giving must be contained and influenced as little as possible by collec- tive, governmental determinations or, as one Commission re- port notes, giving becomes just another way for government to do what it wants to do anyway.
5. To minimize income losses of nonprofit organizations that depend on the current pattern of giving.
While the Commission recognizes that the divisions and des- tinations of the philanthropic dollar have changed consider- ably over, the span of American history, and that they are bound to continue changing as needs change and as priorities of contributors and donees' reliances on public versus private funds themselves shift, the Commission feels that it is not an appropriate time For major decreases in any area of private giving. This is because, as delineated in Chapter III,, nearly all nonprofit organizations are facing extreme financial pressures today. Whether, in the long run, inducements to giving should be oriented towards what are today the hardest pressed organi- zations or whether private giving would better serve public
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needs if it were guided towards other purposes, is another, broader matter that should be examined by any future study of philanthropy and the nonprofit sector.* For now and the foreseeable future, however, the Commission" feels that any in- ducements to giving should not be constructed so as to discour- age giving to current recipients.
6. To be as "efficient" as possible.
The new levels of contributions stimulated should at least approximate the amount of government revenue foregone in order to provide this stimulus.
Three Approaches
The Commission has considered, and has weighed in terms of the above objectives, three basic approaches to providing public encouragement to private giving: the charitable deduc- tion itself, including modifications; tax credits; and matching grants. The charitable deduction permits a taxpayer to sub- tract the'amount of his or her giving from the total income upon which taxes are computed;, A tax credit permits a taxpay- er to subtract a specified amount or percentage of annual giv- ing from the amount of income tax owed. Under matching grant proposals for encouraging giving, the government distrib- utes to charitable organizations a percentage of either the amount each person gives or the amount each organization receives from private sources.