Can Charitable Giving Replace the Social Safety Net?

As the nation seeks to recover from the worst economic slide since the Great Depression, the cities and states with the most-generous residents may be in a better position to help the millions of people still suffering from joblessness and other financial setbacks, say experts.

“There’s a storm coming,” says Bruce Katz, vice president at the Brookings Institution and an expert on the nation’s cities. “Which places are prepared?”

Mr. Katz says local governments should be thinking hard about how to encourage giving because “we don’t have the welfare programs that we have had in the past. The need for individual giving is greater than it has been in modern memory.”

Many fundraisers say they still can’t raise as much as they did before the economy soured in 2008. Particularly difficult to come by, they say, are gifts from affluent donors.

Middle-class Americans give a far bigger share of their discretionary income to charities than the rich. Households that earn $50,000 to $75,000 give an average of 7.6 percent of their discretionary income to charity, compared with an average of 4.2 percent for people who make $100,000 or more.

In the Washington metropolitan area, for example, low- and middle-income communities like Suitland, Md., and Capitol Heights, Md., donate a much bigger share of discretionary income than do wealthier communities like Bethesda, Md., and McLean, Va.

As the nation is about to mark the fourth year since the collapse of the financial markets, many fundraisers had expected gifts from the wealthy to have recovered by now, especially given the gains in the stock market that have helped many affluent people rebuild their net worth.

But that isn’t happening, some experts say, because donors feel so shaky about the economy and uncertain whether Congress will raise tax rates or limit charitable deductions.

Policy makers debating how the tax code should be changed to meet the nation’s challenges need to be aware that charitable giving by wealthy people is particularly sensitive to losses in disposable income, says Robert Sharpe, a Memphis fundraising consultant. “We are looking to people making $200,000 and up to get more than $30-billion back into the nonprofit sector.”

What do you think? Is decentralized giving the most efficient means of enriching the lives of the less fortunate? Can charitable giving repair potentially bigger holes in the social safety net?

Read more about the nation’s generosity divide in the current issue of the Chronicle of Philanthropy.

Shannon McGarry

Project Specialist

Campaign Consultation, Inc.

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Shannon McGarry

Shannon McGarry is Project Specialist at Campaign Consultation, Inc. and an advocate for systemic, holistic approaches to building the capacity of nonprofits and community organizations. She has worked with nonprofits to strengthen and diversify their funding streams, expand and mobilize their membership base, and build sustainable programs. Read more.

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