Cardus makes 2013 prebudget submission

July 24, 2012

On July 24, 2012 Cardus made a prebudget submission for the 2013 federal budget, flagging fresh research in charitable giving and the effect of tax credits.

See our full submission here, and the accompanying data in powerpoint here.

New Polling Research Suggests Increased Charitable Tax Credit Will Have Impact.

Following up on proposals to add an additional category to the charitable tax credit so that donations over $450 receive a 42% tax credit, this submission introduces polling evidence which suggest the impact of such a change will increase the overall amount of charitable contribution.

Detail:

The proposal to increase the charitable tax credit is not an unfamiliar one as for the last several years, various groups including Cardus have made submissions on the subject. The arguments in support of these proposals are familiar:

• Support for the Charitable Sector has been declining in recent years.
• Most of the support is provided by a small “civic core” of Canadians
• This has long-term implications that deserve a strategic policy response

The House of Commons Finance Committee has acknowledged the significance of the issue in its previous reports and has engaged in a special study to study the impact of charitable donations.

Recognizing that the debate at this stage is as much one of considering the relative urgency of this issue in the context of the many other worthy proposals which will certainly be presented to this committee, Cardus engaged a polling firm and asked Canadians how the most prominent proposals made regarding increasing tax incentives for charitable giving might impact their behaviour. The report we received from Angus-Reid Public Opinion is attached as an appendix.

There are several highlights from the report which we would present for your consideration. Figure 1 – Levels of Engagement (see full submission) confirms a pattern that which research that Cardus has previously presented identified, namely that the impact of various proposals on those who already give significant amounts (more than $450 was the question in this survey) are much more engaged in almost all manner of community life than those who do not give. In other words, charitable giving is not an isolated activity that can be incented significantly on its own but is part of a much larger framework of decision-making. In our view, this confirmation has two conclusions for the committee to consider:

  • In the long-term, the problem of declining civic core and decreased charitable giving is not a problem that can be solved through adjustments to the tax code.
  • In the short-term, if we are intent on ensuring that charities maintain their capacity to provide the services we have come to expect of them, the strategy most likely to have an impact is a strategy that focuses on those who are already giving.
  • Canadians indicate that of the three proposals presented to them (1. Cardus’ proposal described in the survey as “Adding a category of 42%, which would provide an extra 13% for gifts totaling over $450 in a given year”; 2. Imagine Canada’s “stretch credit” described in the survey as providing “a 10% tax credit for additional year over year donations”; 3. Don Johnson’s proposal described in the survey as “Providing a special tax incentive for substantial gifts.”), Proposition #1 would be the one most likely “to make our household give more” with 43% agreeing, while Proposition #2 closely followed at 38%.

    As Figure 2 indicates (see full submission), the impact of adding an additional tax category for donations over $450 is that which the various proposals on household and total giving is most likely to increase overall charitable donations.

    Our argument remains that the greatest potential to boost the charitable sector in the short term remains in a substantial increase to the charitable tax credit. This measure will benefit the regular civic core of donors who are sustaining the sector. For them, tax benefit is not the primary motivator for their donation, but it will provide them with increased capacity to give. Even better, the evidence shows they are most likely to return that increased capacity right back to the charitable sector. This measure will help the charitable sector encourage and rely not on exceptionally large gifts, but on regular, repeated gifts from dedicated donors. These are the everyday gifts enabling charities to provide valuable service, and to pursue common good.

    Posted in Civic Core. Linked to Cardus' research project.