via: Imagine Canada
by Bruce MacDonald
In a recent column, Andrew Coyne argues that the best way to address concerns about charities’ political activity is to eliminate the tax credit for those making charitable donations. While we welcome a broad-ranging discussion of the role of charities in Canada – including their role in public policy discussions, their contribution to the economy and our quality of life and their relationship to government – we believe that Mr. Coyne’s focus on this one aspect of Canadians’ relationship with charities is reflective of a growing misunderstanding about the very climate in which charities operate.
Mr. Coyne treats the charitable tax credit as nothing but an expense for the federal government, thereby overlooking what the federal government receives – from charities and from donors – in return for its investment. Charities improve every aspect of community life – from health care, the environment, and education to amateur sports and the arts, and from social services and poverty relief to religious observance. Leveraging the contributions of donors provides the federal government with an excellent return on its investment.
Equally important, charities are engines of economic activity, contributing to jobs and growth all across Canada. Collectively, charities and nonprofits already generate more than 8 per cent of GDP and employ more than two million Canadians. The charitable tax credit helps charities to attract the donations that, in part, make this possible. Federal investment in the sector, through the charitable tax credit, is in this regard no different than policies aimed at encouraging growth in other sectors. The failure to understand this bigger picture is symptomatic of how disconnected from reality the public conversation about charities has become.
Donors motivated by generosity
As to the impact that eliminating the tax credit would have on charities, Mr. Coyne argues that charities should raise money on the strength of their cause and that donors should not expect anything in return from the federal government. We know that most Canadians give to charity because they believe in the cause or organization, not because they think they’ll get something in return. But we also know, through the Canada Survey of Giving, Volunteering, and Participating that almost one-quarter of donors are motivated by the tax credit to give, and that more than half of donors say they would give more if there were a more generous tax credit.
Governments, corporations and Canadians have all been challenged to maintain and enhance their support for charities in recent years given widespread belt-tightening in the face of economic uncertainty. Indeed, Statistics Canada recently published troubling data that strengthens the argument against eliminating the charitable tax credit. In 2012, the total amount of charitable donations claimed by Canadians fell by almost two percent, and the number of Canadians reporting donations on their income tax fell in eleven of the thirteen provinces and territories.
Enhance tax credits, don’t eliminate them
If we want a more vibrant and sustainable charitable sector, if we want more Canadians investing directly in communities, then eliminating the charitable tax credit is the wrong way to go. If anything, the tax credit should be enhanced to encourage a broader range of Canadians to give more and to give strategically.
The 2013 federal budget, in introducing the First-Time Donor’s Super Credit, recognized the challenges charities face in attracting a new generation of donors, through a one-time enhancement of the tax credit for new donors. Imagine Canada believes it is time to encourage all Canadians to stretch their giving or, as the Governor General has suggested, to give more of their time, talent and treasure.
It’s time to stretch
In the next federal budget, we are urging the government to adopt the Stretch Tax Credit for Charitable Giving, which promotes incremental and life-long giving. This innovative proposal, supported by charities across the country, would provide Canadians a higher tax credit for donations exceeding their highest previous level of giving – meaning that additional federal investment would only happen if Canadians stretch their giving. Every community and every charity stands to benefit from its adoption.
Mr. Coyne has done us all a service by raising the important issue of charitable giving. Looking at the bigger picture, though, leads to a vastly different conclusion than he has drawn.