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Increase the incentive to give

March 16, 2011

Slash or spend? Cut or conserve? The federal government will bring down its budget on March 22. What should be in it? We ask five prominent Canadian think-tanks to offer their fiscal fix for the coming year. Charitable giving in Canada involves some curious arithmetic. The dollars that the federal government returns to Canadians in the form of charitable tax credits are considered expenditures from the federal treasury. So when you donate less, Ottawa paradoxically "saves" more - making it (perversely) in its interest for Canadians to give less to charity. This is a problem -because Ottawa needs to do more to encourage giving. Eighteen percent of adults in Canada are responsible for nearly 80% of all money donated to charities, while 6% are responsible for one out of every three dollars. Eighty percent of all volunteer hours are provided by 9% of the population. One out of every five adults accounts for nearly two-thirds of all civic participation. Something has to be done to change these numbers and expand Canada's philanthropic base, because our society is facing an irreversible reality: the demographic shift caused by our aging population. Social demands arising from that shift will include costlier health care and elder care, while the ratio of workers (and their tax dollars) to retirees declines. These demands can be addressed in three ways: through collective, expensive taxpayer-funded government programs, through the individual efforts of affected seniors and their families, or through the community based, targeted, efforts of the volunteer and charitable sector. Take the last element out of the equation, and the burden on the first two groups becomes unsustainable. Canada's charity and volunteer sector today contributes 8.5% of Canada's GDP. Its slice of the GDP exceeds the combined GDP of Nova Scotia, Manitoba and Saskatchewan -and is larger than Canada's retail, automotive or manufacturing sectors. And there is more at stake than dollars and cents. In a far more profound way, reducing the role of the charitable sector comes at the expense of social cohesion, especially in urban areas where "good-works industries," invariably religious in origin, staff the "front lines" of social support, through food banks, meal and shelter programs, friendship centres and the whole host of other services essential to city life. For several years, my group, Cardus, has been pushing to increase the federal charitable tax credit to 42¢ on the dollar from its current 29¢. When we took our arguments to officials at the federal Finance Ministry in 2009, however, they politely told us the increase we were proposing would "cost" the federal treasury $800-million. In the curious arithmetic of Ottawa, this is the same amount the government "saved" when charitable donations came in lower than forecast, and it disbursed fewer charitable tax credits. I urge that the 2011 budget gives the government the opportunity to kickstart a charitable revolution. It's time Canadians let the minister know they're OK with him increasing the charitable tax credit.