Nearly a year ago, Bill and Melinda Gates along with Warren Buffet began a campaign, known as “The Giving Pledge”, which commits wealthy individuals to give away the majority of their wealth to charity. This campaign began after the Gates’ and Buffet pledged the majority of their wealth to philanthropic causes and realized that they should convince other super wealthy individuals and couples to do the same. Recently, the Wall Street Journal ran an article that 16 new billionaire signatories have pledged, including Mark Zuckerberg of Facebook notoriety and Steve Case, co-founder of AOL. They join what now totals as more than 50 donors.
Although the pledge states that one will give away more than half their wealth, which can be in the form of a bequest, many of the new signatories are younger and desire to donate the majority of their fortunes while they are still alive. Younger philanthropy represents a growing trend in the nonprofit world today. Today, philanthropy is not only for the elderly and rich, but younger and younger successful business people are turning their money into charitable results now. One member of The Giving Pledge stated that he would like to direct and take responsibility for his charitable donations. This new trend of younger philanthropy will hopefully help out many worthy charitable groups in the near future and encourage more young entrepreneurs to start giving. To read more click here.
In these trying times with Federal debt increasing daily with no end in sight, President Obama has appointed a committee to research and recommend changes to the tax code that would increase tax revenues. One such change being discussed is to eliminate the tax deduction for charitable gifts and replace it with a special tax credit at a rate of 15%. The tax credit would differ from a traditional tax credit, as it would be paid directly to the charity that received the donation rather than the person making the donation. To illustrate, when a person wants to contribute $100, they would make a donation of $85 the IRS would contribute a check to the charity for remaining $15. This tax credit would allow lower and middle class earners who don’t itemize deductions to donate smaller amounts with the same benefit to their charities.
However, upper middle class and high earners are the main users of the charitable contribution tax deduction and these brackets would be impacted greatly by the proposed change. Charitable high earners historically have been able to make charitable donations to reduce taxable income. The idea of eliminating the deduction is also unsettling to many charities who survive off of big donations from wealthy philanthropists. The reduction of donation revenues to many charities when many are struggling in this weakened economy will affect many people.
The expectation is that the donor base would widen but the amounts per donor would decrease. It remains to be seen if this would increase or decrease overall contributions. Perhaps the committee will continue to brainstorm for ideas.
The recession has reduced incomes for many Americans over the past couple of years and as a result, charitable donations have declined significantly. Hospitals have been hit especially hard in this recession according to a study released by the Association for Healthcare Philanthropy. The study collected fundraising data from 66 hospitals and medical centers for 2008 and 2009. In 2009, one dollar of fundraising costs yielded an average return of $3.57, a decline of 23% compared to the $4.63 it raised the year before. There are two main schools of thought to deal with the declining donations. The first is to increase fundraising spending and hopefully charitable revenues to counteract the decline in donations. The second school of thought believes that hospitals should not reduce their fund-raising staff, even as donations decline and fundraising spending should remain stable. The second group believes that they will be better positioned to take advantage of increased charity giving when the economy improves.
These hospitals need to step back and think about the cost-benefit relationship between increasing costs or keeping them steady, even as donations decline. It could be that the recession will last longer than anyone anticipates and fund raising costs will continue to increase compared to donations at an unsustainable rate. There are no easy answers for hospitals, but they should be cautious in these tough economic times. For more information see the Chronicle of Philanthropy.
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