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Percent Giving to Increase Charitable Donations

Charitable giving is a significant source of income for almost all non-profits, both non-profits serving Americans and NGOs serving people in other countries.  With limited economic growth and household net worths under pressure in the US, charitable giving by Americans looks set to grow little if any in real terms.  Given prolonged federal and state government budget deficits, government spending will not fill the social gaps—in fact, it has never come close to doing so, even in prosperous times.

Yet the level of giving in the US by those earning over $100,000 annually is disturbingly low.   On average, higher income individuals donate just over 2% of their income, according to the Center on Philanthropy at Indiana University.  Shockingly, this giving percentage is half the percent of income of those earning under $50,000 per year, who give approximately 4% of their income.

What percent of your income do you give?

While Bill Gates and Warren Buffett have commendably set an example and persuaded a small number of other billionaires to give away 50% or more of their net worth—and sooner rather than later—the vast majority of higher income individuals are giving far less than they should. And the needle is not moving. US giving has been stuck for decades at a long-term average of about 2% of GDP. If we can increase this level by 0.2% of GDP, that will generate $30 billion more per year in giving.

We believe the key is to change how people calculate their giving goals:

  • From the current, arbitrary, and subjective process, e.g., “I gave $1,500 last year, so I’ll give $1,600 this year” (subconscious thinking: “I’ve increased my giving compared to last year even though the economy is not great; that’s pretty generous of me”)
  • To a giving thought process and calculation based on giving as a certain percentage of income (new thinking: “I didn’t realize that I was giving so much less of my income to charity than other people who earn a lot less than I do; I’d better give more.”).

The minimum target giving could, for example, be 5% of income for those earning $100,000 per year, with the percentage increasing as income increases.

As with littering, smoking, and drinking-while-driving, social behavior can be changed with the right combination of laws (in this case, a tax code amendment) and social marketing. For example, individuals could learn to think in terms of percent giving, by requiring them to donate at least 1% of their Adjusted Gross Income, in order to qualify for a charitable giving tax deduction.

We will work with numerous other individuals and organizations on a long-term national “Percent Giving” campaign to help lead this effort. The campaign, which must be very large-scale and continue over many years, in order to permanently change behavior and national giving averages, will eventually be self-funded by the many non-profit charity recipients, whose donations increase due to the campaign.

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