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December 2000 Fraser Forum:
Canadian & American Monetary Generosity¹

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Jason Clemens& Johanna Francis

The charitable sector² is a vital part of Canadian society. It is a unique sector, separate from the government and for-profit business sectors. It provides a wide range of goods and services that would often not otherwise be available. It acts as a conduit through which citizens can connect with each other, and affect the landscape of their communities. Given its importance in society, it is critical that we continue to deepen our understanding of the sector.

To this end, The Fraser Institute has completed a number of studies looking at the charitable sector. This is the third year in which we have completed research in the area of charitable giving. In previous years, we have evaluated generosity using both monetary indicators and volunteering. Unfortunately, current data for volunteering in Canada is not available.³ The 2000 study, therefore, focuses exclusively on financial generosity.

Results for Canada and the US

Table 1 contains the results and rankings for three variables: (1) the percentage of taxpayers who donate to registered charities, (2) the percentage of income donated to registered charities, and (3) the average charitable donation.

Percentage of taxpayers making donations

The first of the three variables is the percentage of taxpayers who donate to registered charities. It measures the extent or breadth of monetary generosity.

There appears to be very little differentiation between Canadians and Americans in terms of the percentage of each who donate to charities: 26.6 percent of American taxpayers donated to charities while 26.4 percent of Canadian taxpayers did the same.⁴

As in previous years, Maryland had the highest proportion of taxpayers making charitable donations (40.1 percent) for both the US and Canada. New Jersey donated the next highest percentage (36.9 percent). South Dakota, on the other hand, recorded the lowest percentage of taxpayers making charitable donations (11.9 percent).

The top Canadian province for this variable was Manitoba, where 30.6 percent of taxpayers donated to registered charities, 9.5 percentage points lower than Maryland. Ontario and Saskatchewan followed closely with 28.9 percent and 28.6 percent, respectively. Newfoundland recorded the lowest percentage of taxpayers making charitable donations in Canada (22.4 percent), but 10.5 percentage points higher than South Dakota.

The range among Canadian provinces in terms of the percentage of taxpayers who made charitable donations (8.2 percentage points) was markedly narrower than the range recorded in the US (28.2 percentage points).

Although there was a substantial difference between the top US state and the top Canadian province�Manitoba ranked 14th overall�the overall distribution of rankings suggests a relatively positive performance for the Canadian provinces. Four of the ten provinces ranked in the second quintile⁵ and three in both the third and fourth quintile. No Canadian province ranked in either the top or the bottom quintile for this variable.

A worrisome Canadian trend

By and large, the US experienced an across-the-board increase in the number of taxpayers who donated to charities from the previous year. Arkansas led the US states with a 3.9 percent growth rate in the percentage of donors relative to taxpayers between 1996 and 1997. A host of states, including Alaska, the District of Columbia, Indiana, and New Mexico registered similar growth rates. New York was the only state that recorded a contraction in the percentage of taxpayers making donations, albeit a small one of 0.2 percent. In total, the US experienced an increase of 2.1 percent in the percentage of taxpayers donating to charities.

Canada, on the other hand, continued its own worrisome trend in which the proportion of taxpayers donating to charities is continuing to decline. Between 1996 and 1997, the provinces experienced an average decline of 4.9 percent in the percentage of taxpayers making donations, ranging from a decrease of 1.0 percent in BC to 9.8 percent in Quebec. This trend of a declining proportion of taxpayers supporting charities has been relatively constant throughout the 1990s. For example, between 1990 and 1997, the provinces experienced an average 13.8 percent decline in the percentage of taxpayers making charitable contributions, ranging from a decline of 7.1 percent in Newfoundland to 20.1 percent in Nova Scotia.

Percent of income donated to charities

The second measure of monetary generosity is the total percentage of income donated to registered charities in each state or province. Income measures in each jurisdiction were adjusted to reflect after-tax income since it is impossible to donate monies already taken in tax.⁶ Table 1 contains the results and rankings of both the Canadian provinces and US states.

Table 1: Results & Rank for Charitable Contributions�Canada & US

	# of Donors	Rank	% of Income	Rank	Avg. Donation	Rank
Alabama	22.9%	45	3.51%	5	3,643	9
Alaska	17.9%	53	2.02%	48	2,731	29
Arizona	28.6%	20	2.82%	24	2,547	39
Arkansas	17.9%	52	3.18%	12	3,826	8
California	31.0%	12	3.00%	16	2,831	26
Colorado	31.0%	11	2.92%	19	2,708	32
Connecticut	35.8%	3	2.81%	26	2,831	25
Delaware	31.8%	8	2.91%	20	2,653	34
District of Columbia	31.6%	9	4.77%	2	4,425	4
Florida	21.2%	50	2.93%	18	3,633	10
Georgia	28.5%	22	3.57%	4	3,333	13
Hawaii	29.1%	17	2.52%	38	2,162	47
Idaho	25.9%	30	3.45%	8	3,063	18
Illinois	27.5%	25	2.64%	31	2,839	24
Indiana	22.1%	49	2.52%	39	2,904	20
Iowa	23.5%	41	2.47%	41	2,503	40
Kansas	23.9%	39	2.87%	22	3,136	17
Kentucky	23.3%	42	2.65%	29	2,631	36
Louisiana	14.9%	57	2.24%	45	3,509	11
Maine	24.2%	38	2.20%	46	2,040	49
Maryland	40.1%	1	3.51%	6	2,721	30
Massachusetts	33.3%	6	2.61%	33	2,495	41
Michigan	28.8%	19	2.81%	25	2,687	33
Minnesota	34.3%	4	3.13%	13	2,485	42
Mississippi	16.0%	55	3.02%	14	3,870	7
Missouri	22.7%	47	2.63%	32	2,899	21
Montana	23.3%	43	2.65%	30	2,303	45
Nebraska	23.0%	44	2.90%	21	3,011	19
Nevada	26.0%	29	2.57%	35	2,777	28
New Hampshire	27.9%	24	1.86%	50	1,982	51
New Jersey	36.9%	2	2.75%	27	2,461	43
New Mexico	19.3%	51	2.38%	44	2,613	37
New York	34.0%	5	3.73%	3	3,292	14
North Carolina	26.5%	27	3.31%	11	3,148	16
North Dakota	14.7%	58	1.91%	49	2,714	31
Ohio	25.1%	33	2.50%	40	2,451	44
Oklahoma	22.9%	46	3.37%	10	3,345	12
Oregon	30.2%	15	2.96%	17	2,563	38
Pennsylvania	25.7%	31	2.56%	36	2,644	35
Rhode Island	31.2%	10	2.38%	43	1,993	50
South Carolina	24.4%	35	3.40%	9	3,226	15
South Dakota	11.9%	61	2.46%	42	4,541	3
Tennessee	16.4%	54	2.84%	23	4,342	5
Texas	15.7%	56	2.54%	37	4,246	6
Utah	33.0%	7	6.80%	1	5,266	2
Vermont	24.5%	34	2.16%	47	2,061	48
Virginia	30.7%	13	3.02%	15	2,824	27
Washington	26.8%	26	2.73%	28	2,867	23
West Virginia	12.2%	60	1.62%	51	2,874	22
Wisconsin	29.6%	16	2.58%	34	2,199	46
Wyoming	14.1%	59	3.49%	7	6,247	1
United States	26.6%		2.91%		2,967
British Columbia	24.3%	36	1.25%	55	1033	53
Alberta	26.3%	28	0.98%	60	1037	52
Saskatchewan	28.6%	21	1.32%	54	915	55
Manitoba	30.6%	14	1.46%	52	882	56
Ontario	28.9%	18	1.21%	57	944	54
Quebec	23.7%	40	0.58%	61	400	61
New Brunswick	24.3%	37	1.24%	56	818	57
Nova Scotia	25.4%	32	1.17%	58	719	58
Prince Edward Is.	28.3%	23	1.36%	53	697	59
Newfoundland	22.4%	48	1.14%	59	690	60
Canada	26.4%		1.07%		822
Sources: IRS Statistics of Income Bulletin, Spring 1999. Prepared by the Center on Nonprofits & Philanthropy at the Urban Institute; Revenue Canada, Tax Statistics on Individuals, (1997 Tax Year), Interim Statistics, 1999.

Unlike the previous measure of monetary generosity, with this measure there is a considerable difference between the aggregate performance of the two countries. Americans allotted 2.9 percent of income to charities in 1997 while Canadians donated 1.1 percent. Again, there is considerable variance between the Canadian provinces and US states.

Utah tops the list of jurisdictions with 6.8 percent of its income, adjusted for taxes, donated to charities. There is a considerable gap between Utah and the next two states: District of Columbia (4.8 percent) and New York (3.7 percent). West Virginia recorded the lowest percentage of income donated to charities (1.6 percent) for US states.

The Canadian provinces record a rather poor showing in this measure of monetary generosity. The top-ranked Canadian province was Manitoba, whose citizens donated 1.5 percent of their income to charities. Manitoba�s overall rank was 52nd. Utah, the top-ranked US state, allocated 4.5 times more income to charities than Manitoba.

In fact, every Canadian province ranked in the bottom quintile in terms of the percentage of income donated to charities. Worse still, Quebec, the lowest-ranked Canadian province with a mere 0.6 percent of income donated to charities, also achieved the dubious honour of recording the absolute lowest rank of any US state or Canadian province.

Like the previous measure of monetary generosity, the range among Canadian provinces in terms of income donated to charities (0.9 percentage points) was markedly smaller than the range recorded in the US (5.2 percentage points).

Positive trend

A seemingly contradictory trend continues to emerge in Canada wherein fewer people, as a percentage of taxpayers, are giving more money. That is, while the proportion of taxpayers who donate to charities is declining in Canada, the percentage of income they donate has consistently increased. Between 1996 and 1997, Manitoba experienced the largest increase (13.7 percent) in the percentage of income donated to charities, compared to a provincial average increase of 9.2 percent.

More startling are the increases recorded since 1990. On average, the provinces gave 21.0 percent more to charities as a percentage of income�led by British Columbia with a 36.0 percent increase.⁷

The US states experienced significantly larger increases than did the Canadian provinces, partly because the percentage of US taxpayers donating to charities is increasing rather than decreasing as is the case in Canada. On average, the percentage of income donated by the US states increased 56.3 percent between 1996 and 1997.

The value of charitable donations

We also looked at the average charitable donation made in each jurisdiction. The calculation used to determine the average donation is different than the one used to determine the percentage of income donated, so the two are not readily comparable.

The results for the average donation mirror those garnered from the 1999 study. As in previous years, Alberta maintains the highest average charitable donation in Canada of Cdn $1,037, while Quebec records the lowest average donation of Cdn $400.

Similarly, citizens of Wyoming again give the highest average charitable donation in the US of US $6,247. The lowest-ranking US state, New Hampshire, records an average donation of US $1,982.

Once more, the Canadian provinces rank dead last, without exception, in terms of the average dollar value of charitable donations when compared with US states. Alberta, the highest-ranking Canadian province only ranks 52nd when compared with the US states. Worse still, the dollar values presented in table 1 are NOT adjusted for differences in national currencies: US donations are shown in US dollars and Canadian donations are shown in Canadian dollars. If either the US or Canadian data were translated into a common currency using either Purchasing Power Parity or the actual exchange rate, the differences between the US and Canada would be substantially greater.

Canada-US Monetary Generosity Index

A different and more accessible way to understand the data in table 1 is to create an index. Table 2 contains the specific index scores for both the percentage of taxpayers who donate to registered charities and the percentage of income they donate, as well as an overall aggregate index score. This index gives a straightforward method to evaluate the monetary generosity of Canadian provinces and US states.

Table 2: Index Scores�Canada & US

	State/Province	Index: Donors as a % of Taxpayers	Index: Donations a % of Income	Aggregate Index Score
1	Utah	8.2	10.0	9.1
2	Maryland	10.0	5.2	7.6
3	District of Columbia	7.9	7.0	7.4
4	New York	8.5	5.5	7.0
5	New Jersey	9.2	4.0	6.6
6	Minnesota	8.5	4.6	6.6
7	Connecticut	8.9	4.1	6.5
8	Georgia	7.1	5.2	6.2
9	Delaware	7.9	4.3	6.1
10	California	7.7	4.4	6.1
11	Massachusetts	8.3	3.8	6.1
12	Virginia	7.7	4.4	6.0
13	Colorado	7.7	4.3	6.0
14	Oregon	7.5	4.3	5.9
15	Idaho	6.5	5.1	5.8
16	North Carolina	6.6	4.9	5.7
17	Michigan	7.2	4.1	5.7
18	Rhode Island	7.8	3.5	5.6
19	Arizona	7.1	4.1	5.6
20	Wisconsin	7.4	3.8	5.6
21	South Carolina	6.1	5.0	5.5
22	Hawaii	7.3	3.7	5.5
23	Alabama	5.7	5.2	5.4
24	Illinois	6.9	3.9	5.4
25	Washington	6.7	4.0	5.3
26	Oklahoma	5.7	5.0	5.3
27	Nevada	6.5	3.8	5.1
28	Kansas	6.0	4.2	5.1
29	Pennsylvania	6.4	3.8	5.1
30	Nebraska	5.7	4.3	5.0
31	Ohio	6.2	3.7	5.0
32	Manitoba	7.6	2.1	4.9
33	Kentucky	5.8	3.9	4.9
34	Montana	5.8	3.9	4.8
35	New Hampshire	6.9	2.7	4.8
36	Florida	5.3	4.3	4.8
37	Missouri	5.7	3.9	4.8
38	Iowa	5.9	3.6	4.7
39	Vermont	6.1	3.2	4.6
40	Maine	6.0	3.2	4.6
41	Indiana	5.5	3.7	4.6
42	Arkansas	4.5	4.7	4.6
43	Saskatchewan	7.1	1.9	4.5
44	Prince Edward Island	7.0	2.0	4.5
45	Ontario	7.2	1.8	4.5
46	Wyoming	3.5	5.1	4.3
47	Mississippi	4.0	4.4	4.2
48	New Mexico	4.8	3.5	4.2
49	Tennessee	4.1	4.2	4.1
50	Nova Scotia	6.3	1.7	4.0
51	Alberta	6.6	1.4	4.0
52	British Columbia	6.1	1.8	3.9
53	New Brunswick	6.0	1.8	3.9
54	Texas	3.9	3.7	3.8
55	Alaska	4.5	3.0	3.7
56	Newfoundland	5.6	1.7	3.6
57	Louisiana	3.7	3.3	3.5
58	Quebec	5.9	0.9	3.4
59	South Dakota	3.0	3.6	3.3
60	North Dakota	3.7	2.8	3.2
61	West Virginia	3.1	2.4	2.7

Like the 1999 results, the index calculation that combines the percentage of taxpayers donating to charities and the percentage of income donated to charities reveals a large gap between the top-ranked jurisdiction and the remaining provinces and states. Utah, with a score of 9.1 out of 10, significantly outperforms the second-ranked jurisdiction, Maryland, with a score of 7.6.

Manitoba achieves the highest rank of any Canadian province at 32nd with a score of 4.9. Three provinces tie for the next highest Canadian score (4.5) and rank (43rd): Saskatchewan, PEI, and Ontario. Unsurprisingly, Quebec has the lowest score (3.4) and rank (58th) of any Canadian province. In terms of the distribution of rankings, 1 Canadian province is in the third quintile, 3 are in the fourth quintile, and 6 are in the bottom quintile. No Canadian province scored high enough to place in either of the top two quintiles.

Explaining the difference

Although a more rigorous, time-based analysis is required of the charitable giving and generosity data, it seems clear that there are a number of variables influencing the level of charitable giving. For instance, we know from a variety of sources that demographics influence charitable giving. The distribution of age, sex, and occupations as well as educational attainment seems to have a minor effect on charitable giving, although again, more rigorous analysis is required to draw any definitive conclusions.

Economic variables, such as average income levels, unemployment, size of government, and tax burdens also seem to affect the results to varying degrees. Once more, these preliminary inferences are not definitive conclusions, but rather observations requiring greater research.

Finally, it is interesting to note the trend, repeated again, of both western and "have" provinces performing fairly well, while eastern and "have-not" provinces perform relatively poorly. It is also interesting to compare the trend noticed this year�when volunteering was excluded�to that of previous years when volunteering was included. The trend remains: western and "have" provinces perform relatively better, although the trend is not as strong without the volunteer factor.

Conclusion

Generally, people agree that the role and importance of charities and non-profit organizations in society is growing. As a consequence, it is important for us to understand how these organizations function.

This study�s data corroborates other research that indicates a worrisome trend in Canada; a declining percentage of total taxpayers donate to charities. On the other hand, those who do donate are donating more. The data also reveal the considerable gap between US states and Canadian provinces in terms of the amount donated to registered charities. Why do we see such stark differences? Only further research will provide a firm explanation.

Notes

¹This article was originally intended to be a formal study (released as a Public Policy Source). There is, therefore, a considerable amount of information and data not presented in the article but which is readily available upon request. Contact the authors by e-mail at jasonc@fraserinstitute.ca.

²All registered charities are non-profits, but not all non-profits are registered charities.
Registered charities are, therefore, a subset of the larger non-profit sector. Receiving charitable status allows agencies to issue tax-deductible receipts to donors and receive funding from registered foundations. It also places them under the purview of Revenue Canada. Conversely, non-profit organizations that do not receive charitable status are precluded from issuing tax receipts and receiving monies from foundations, but neither are they under the regulatory control of Revenue Canada.

³The Revenue Canada database, from which we extract data, has not been available for the past 2 years.

⁴Americans can file their income taxes as either itemized or non-itemized returns. Charitable contributions are only counted for those tax-filers submitting an itemized claim where specific deductions are made for charities. Thus, the number of Americans who actually donate to charities would be much higher if non-itemized returns were included.

⁵The Canadian provinces and US states were divided into 5 groups of equal size based on their performance in each of the variables. Each group is referred to as a quintile since each contains of the total number of jurisdictions.

⁶For a complete description and discussion of the methodology employed in making this adjustment, please see: 1999 Private Charitable Generosity Index, Public Policy Sources no. 34, available on the internet at www.fraserinstitute.ca/publications/pps/34/.

⁷The trend of fewer people (as a percentage of total taxpayers) donating more in Canada continues beyond the 1997 data presented here. According to Statistics Canada, apart from a small deviation in 1998, 0.05 percent fewer people (as a proportion of taxpayers) donated to charity in 1999 than in the previous year. However, the value of those donations, even after adjusting for inflation, increased by 2.7 percent.

References

Clemens, J. and D. Samida (1999). "1999 Private Charitable Generosity Index." Public Policy Source #34. Vancouver, BC: The Fraser Institute.

Fleenor, Patrick (1997). "Tax Freedom Day 1997 is May 9." No. 69. Washington, DC: Tax Foundation. April.

Internal Revenue Service (1999). IRS Statistics of Income Bulletin. Washington, DC. Spring.

Revenue Canada. Tax Statistics on Individuals. Ottawa, Ontario. Series: 1992, 1995, 1997, 1998, 1999.

Statistics Canada (1998). Caring Canadians, Involved Canadians: Highlights from the 1997 National Survey of Giving, Volunteering and Participating. Cat. #71-542-XIE. August.

Tax Foundation (2000). Calculations of Tax Burden and Net-National Product. Supplied to authors. Washington, DC: Tax Foundation.

Urban Institute (2000). Profiles of Individual Charitable Contributions by State, 1997. Washington, DC: Urban Institute.

Urban Institute (2000). Analysis of data from IRS Statistics of Income Bulletin. Supplied to authors via fax. Washington, DC: Urban Institute.

Jason Clemens (jasonc@fraserinstitute.ca) is the Director of Fiscal Studies at The Fraser Institute. He has a Masters Degree in Business Administration from the University of Windsor.

Johanna Francis has worked as a researcher at The Fraser Institute. She has an M.A. in Economics from McGill University and is currently completing her Ph.D. in Economics at Johns Hopkins University in Baltimore.