News and analysis
August 19, 2012

Rich Enclaves Are Not as Generous as the Wealthy Living Elsewhere

The nation’s most-generous ZIP codes aren’t its richest. And when large numbers of rich people live in one neighborhood, their giving is even more likely to drop to well below average rates.

A new Chronicle study of tax records shows that of the top 1,000 ZIP codes that give the biggest share of income, only nine are among the nation’s 1,000 richest ZIP codes. In city after city, it’s the low-income residents who lift giving levels.

For example, the most-generous communities in the Washington metropolitan area (which ranked as No. 8 among the nation’s 50 biggest urban areas) are not the wealthy suburbs that one might suspect—such as Bethesda, Md., or McLean, Va.—but low- and moderate-income communities like Suitland and Capital Heights, both in Maryland. (See article on Page 8.)

To be sure, when measured in total dollars donated, affluent people give the most. The wealthiest group in The Chronicle’s survey—those with annual incomes of $200,000 or more—accounted for 11 percent of the tax returns but gave 41 percent of the money.

Out of Sight and Mind

Plenty of people, including philanthropy evangelists like Warren Buffett and Bill Gates, think the rich could do much more. But that isn’t likely to happen when rich people are living in enclaves with one another.

The Chronicle’s study found that when wealthy people are heavily clustered in a neighborhood—meaning that when households making more than $200,000 a year account for more than 40 percent of the taxpayers—the affluent households give an average of only 2.8 percent of discretionary income to charity.

That’s lower than the overall giving rate in all but four of the nation’s 366 metropolitan areas.

Paul Piff, a postdoctoral scholar in psychology at the University of California at Berkeley, says he has conducted studies showing that as wealth increases, people become more insulated, less likely to engage with others, and less sensitive to the suffering of others.

But he says those class differences dissolved in an experiment he once conducted in which both wealthy and lower-income participants were required to watch a short video about childhood poverty.

“Simply seeing someone in need at the grocery store—or looking down the street at a neighbor’s modest house—can serve as basic psychological reminders of the needs of other people,” he says. “Absent that, wealth will have these egregious effects insulating you more and more.”

Jim Calaway’s experience illustrates how geography can shape giving. Mr. Calaway made a fortune in the oil business in Texas and began eyeing a move to the mountains of Colorado around the same time that he joined the board of the Aspen Institute 15 years ago.

But Mr. Calaway chose Carbondale, Colo., a bedroom community near Aspen, over the glitzy ski town itself.

Mr. Calaway, who lives with his wife in a relatively modest home, has become a stalwart local donor, building a no-kill animal shelter just outside town, serving on the board of Colorado Mountain College, helping to found the Roaring Fork Cultural Council, and giving funds to build a new cancer center at the hospital in nearby Glenwood Springs.

“Making a lot of money and spending it on yourself is not a lot of fun,” he says. “What is a lot of fun is to live modestly so that you can give to the common good. That’s where happiness really lies.”

Big Mortgages

In some affluent communities, it’s not just that giving is below average: It barely registers.

In 1,906 ZIP codes that each have at least 10 taxpayers earning $200,000 or more and at least one household itemizing returns, none of the wealthy residents listed any charitable contributions at all on their tax returns.

Seventy-nine percent of these ZIP codes lie outside major metropolitan areas, but at least a few “no-giving” ZIPs exist in every state and in most major metropolitan areas.

Robert Sharpe Jr., a fundraising consultant in Memphis, points out that in some expensive areas, even people earning $200,000 a year may not have much left to give to charity, particularly if they live in big houses and are paying for private schools. Neighborhoods with high rates of turnover also tend to be less philanthropic, he says.

“It’s not that they’re bad people,” he says. “They’re just not rooted in the community.”

A Community’s No-Gift Record

The dubious honor of having the greatest number of rich people who didn’t list any itemized gifts goes to the rural farming community of Langdon, N.D (population 1,878), which had 34 taxpayers who listed incomes of $200,000 or more in 2008—and nary an itemized gift among them.

Mr. Sharpe points out that some of the ZIP codes in which the wealthy appear not to be giving to charity may simply have a large population of residents for whom it makes no sense to itemize deductions—and that turns out to be the case in Langdon.

Carol Hart, executive director of the Northern Lights Arts Council, in Langdon, says she’s had little trouble raising money. The arts council operates a nonprofit movie theater—the only theater within a 65-mile radius—and in May 2011 the council advertised that the theater would have to close if it didn’t raise enough money to buy a digital projector.

Gifts began to flow in from individuals—two $10,000 gifts, a couple more worth $2,500—and by that September the Northern Lights Arts Council had collected $87,000, without any formal fundraising. Churches and health groups have also successfully raised money in Langdon, she says.

“We have a lot of charitable giving in our community,” Ms. Hart says.

Older Neighborhoods

For many people who itemize, the largest deductions are often mortgage interest and state income taxes. Those who don’t itemize can always take the standard deduction, now worth $11,900 for joint returns.

North Dakota has a relatively low state income tax—4.86 percent for those in the highest bracket. And Langdon is a community made up of older residents than other places (the median age is 46, nine years older than the state average) with relatively low housing costs, so many of the town’s residents may have paid off their mortgages.

Meanwhile, in some urban and suburban areas, 80 percent or more of the population rents rather than owns a home, and those taxpayers may not benefit from itemizing, either.

Says Mr. Sharpe: “I don’t think there are any places in the country where there’s a whole neighborhood of people where no one is giving to charity.”