Its health is a matter of national interest and would be considerably enhanced through a simple increase of the charitable tax credit for individual donations in excess of $200 from the present 29 per cent to Cardus's proposed 42 per cent. What gets rewarded, after all, is what gets done and while bricks, mortar, timber, roads and metal are all important, nothing is as vital to a nation in the long run as its social architecture.
Imagine Canada, representing dozens of charities across Canada, recommended three broad themes in its May 2008 position papers. These included "Tax Incentives to Stimulate Giving" and concluded that tax incentives are an important stimulus for giving. While the results (and consequently the exact costs) of this tax reduction measure are difficult to project, we know that charitable donations in British Columbia increased by 5 per cent in three years following an increase in the charitable donation credit. In the state of Arizona, a combination of tax credit and tax deduction in certain sectors saw charitable contributions triple in three years.
That charities need and deserve help in these troubled times is a point few would dispute. In mid December, it was reported that the Salvation Army's donations were down 30 per cent. Even as challenging times place a greater demand on their services, many charities are struggling to pay the bills. Of Canada's 161,000 charities and non-profits, two-thirds report annual revenues of less than $100,000. Yet, they all combine to provide services, many of them essential, which enrich the social, physical, and spiritual lives of Canadians. And, if and when charities can no longer fail to attend to those among us who need their services, the burden of their care falls to governments, typically at higher costs in the long term.
Some large charities urged Finance Minister Jim Flaherty to exempt charitable gifts of private company shares and real estate donated to charity from capital gains taxes. The benefits of that approach will primarily advantage large charities and large donors. The benefits of changing the tax credit, on the other hand, are most likely to be experienced by charities across the board. It also provides encouragement to many more of the 25 per cent of Canadian taxpayers who in combination contribute $8.5 billion (2006 data) annually to charities.
A consensus has emerged among political leaders of all parties that economic stimulus is a current necessity. There are many more ideas being proposed than can be responsibly implemented, so there is an onus on advocates to outline the return on investment that the taxpayer will receive. Without more detailed government data, it is impossible to accurately project the cost of foregone tax revenue for this proposal. Back of the envelope guesstimates suggest $400-$600 million is required, a reasonable amount placed in context of a $30 billion stimulus package.
But this loss of federal revenue is not money lost to the economy. Increasing the charitable credit ensures continued and increased spending by charities and protects the treasury from increased demands on social programs. There is no reason to fear additional support to this component of society will go to fatten executive bonuses or be frittered away on chartered jets, after all.
People support different charities, depending on their religious, cultural, or aesthetic appetites. That diversity is also the strength of this approach as giving reflects our commitments to organizations that relieve poverty, promote education and advance faith-based or other benevolent motivations. A strong charitable sector including universities, hospitals and hospices, arts and sports groups, poverty and publishing programs, synagogues and churches, provides ways for Canadians to be their best and show compassion to the least.
Charities are not vehicles for greed, excess or profit. They are the products of our generosity, kindness and creativity - vital components of a healthy society without which financial economies cannot thrive.
This forthcoming budget is an opportunity for all sectors to reconsider their fundamentals. It would be a shame if we went through this collective exercise as a country and neglected those important organizations whose very existence defines and gives expression to who we are.
Ray Pennings is Director of Research for Cardus, www.cardus.ca.