This article was updated on January 13, 2015. See our editor’s note.
The growing income gap between the rich and the poor in America is reshaping generosity across the nation.
The wealthiest Americans are giving a smaller share of their income to charity, while poor and middle-income people are digging deeper into their wallets, according to a new Chronicle analysis of IRS data that shows how charitable giving has been changed by the Great Recession.
Some nonprofit leaders, especially those who serve the poorest people, say it was the loyalty of people with low and moderate incomes that sustained them in the roughest periods of the economy and is continung to do so now in the recovery.
“It hits closer to home,” says Tami Phillips, chief development officer at the Midnight Mission, a Los Angeles shelter. “Any day, they too could become homeless.”
But charities still need to count on the wealthy: Because the ranks of the country’s richest people have been growing so fast, the total dollars they contribute are propelling a big piece of the recovery that charities are now experiencing.
The change in giving patterns has been felt most in America’s biggest cities, where the percentage of income that residents donated dropped greatly in 2012 compared with 2006.
Big Decline in Cities
Thirty-six of the largest cities experienced declines, most notably Buffalo, N.Y., and Philadelphia, where the share of income given to charity fell by more than 10 percent. Los Angeles, Minneapolis-St. Paul, and Washington all had drops of more than 9 percent.
Generosity can be measured in many ways, and looking at total dollars donated versus donations in relation to share of income shows how stark the comparisons can be.
The wealthiest Americans—those who earned $200,000 or more—reduced the share of their income they gave to charity by 4.6 percent from 2006 to 2012.
Meanwhile, Americans who earned less than $100,000 (including poor and middle-class families with two working adults) donated 4.5 percent more of their income in 2012 than in 2006.
But wealthier Americans had far more dollars than low-income people at their disposal. The total the richest donated soared by $4.6-billion after adjusting for inflation, reaching $77.5-billion in 2012, even though the share of income they gave was shrinking. Those who earned less than $100,000 gave $57.3-billion.
Utah Tops the List
The Chronicle’s report, which analyzed tax data for every county of America, also found that:
- Residents of Utah remain by far the nation’s most generous, as previous studies have shown. For every $1,000 they earned, they donated $65.60 to charity. As in previous studies, New Hampshire residents remain the least generous They gave $17.40 for every $1,000 they earned.
- Nevada was the state with the fastest-growing rate of donations as a share of income, jumping nearly 13 percent from 2006 to 2012. Residents of the state donated 2.7 percent of their income to charity. Such gifts helped Las Vegas become the fastest-growing city in terms of generosity, rising 21 places since 2006 in a ranking of the country’s 50 largest metropolitan areas.
- North Dakota saw the biggest decline in giving. Residents reduced the share of income they donated by nearly 16 percent, contributing $24 for every $1,000 earned on average. That dip has serious implications, especially in the parts of the state where an oil boom has led to an influx of people who lack shelter, social services, and other essentials.
- Nine of the 10 biggest cities where residents gave the biggest share of income to charity were in the Sun Belt. Salt Lake City, in the top spot, owes its high giving rate in part to the heavy presence of Mormons, whose church practices call for them to give at least 10 percent of their income to charity. Leaders of nonprofit groups in places like Atlanta and Memphis say that while religious giving continues to propel strong rates of generosity, campaigns for education and other secular causes are also now driving up donations.
The Chronicle analysis is based on the tax returns filed by the 30 percent of Americans who itemize their deductions, including their charitable gifts. The income figures analyzed are for the total amount that people reported after they claimed deductions, including those for charitable giving.
Because people who itemize are the biggest donors, The Chronicle’s data cover all but about 20 percent of the donations individuals made to charity in 2012, according to Giving USA.
Uneven Generosity
While the state of the economy continues to be the key driver of charitable giving, the Chronicle’s analysis shows that it is possible even in tough times for strong charitable appeals to overcome money woes.
That can be seen in cities that rose fast in the ranks of generosity, such as Jacksonville, Fla. The city’s share of income given to charity increased by more than 8.8 percent from 2006 to 2012, the second-highest growth rate among the nation’s 50 largest metropolitan areas. People in the city donated nearly 4 percent of their incomes, on average, to charity.
Jacksonville donors have rallied behind a high-profile effort to improve the region’s public schools. They contributed more than $40-million to a public-education fund established in 2012 at the Community Foundation of Northeast Florida. “There’s a groundswell here of philanthropy centered on education,” says Gary Chartrand, a businessman who, with his family, established the Chartrand Foundation to support efforts to improve public education in Jacksonville. “The energy is high, the investment is high, and the stakes are high.”
Jacksonville’s increase came even though the region was still suffering from major effects of the financial crisis. In 2012, home values in the city were still well below prerecession levels and employment hadn’t fully recovered to 2006 rates.
Education a Driver
In a town that is much farther south on Florida’s eastern coast, Vero Beach, education was also a factor in increased giving.
But the coastal community’s giving patterns also show how important the superwealthy and elderly are to charities. Vero Beach’s residents include Peter Peterson, co-founder of the Blackstone private-equity group, who in 2010 pledged to donate more than half of his more than $1-billion in assets to charity.
During the downturn, Mr. Peterson and other Vero Beach residents gave freely, chipping in tens of millions of dollars to fund cancer and cardiac centers at the local hospital, more than $25-million to support a new community foundation, and millions to support elementary and secondary education.
Residents of Vero Beach, where more than 27 percent of the population is 65 or older, gave 4.3 percent of their income to charity in 2012, compared with 3.7 percent in 2006. The surge in giving is largely a response to state education cutbacks, says Ray Oglethorpe, a retired AOL executive who sits on the boards of the community foundation and the Learning Alliance, a local charity focused on childhood literacy.
“The school district took a big hit and philanthropy stepped in the gap to try and make a difference,” he says.
Smaller charities have also benefited.
Since 2005, gifts to the Indian River Education Foundation have risen from $270,000 to $435,000.
To generate enthusiasm, the group’s executive director, Cynthia Falardeau, packed a school bus with prospective supporters and took them on a tour to show improvements in school technology and vocational training that her foundation supported. “It’s not flashy or fabulous, but it worked,” she says.
William Emmons, senior economic adviser at the Center for Household Financial Stability, says charities beyond Vero Beach should pay attention to the age of the donors they solicit. The net worth of families in which the head of the house was 62 or older grew by 3 percent from 2007 to 2013, according to the Federal Reserve of St. Louis, more than in any other age group. As the baby-boom generation ages, charities are likely to find fertile ground for donors in regions with a lot of elderly residents, who control about 47 percent of the nation’s wealth, says Mr. Emmons.
“That group got hit very hard by the stock market, but they’ve bounced back,” he says. “The older part of the population is getting bigger and controlling more of the wealth. The demographics are driving toward higher giving.”
Rise of the Wealthy
While the richest Americans didn’t increase their share of giving as much as others did, fundraisers will continue to count on the wealthy because their ranks are growing. Americans earning $200,000 or more in 2012 totaled 4.8 million, a million more than in 2006.
The affluent’s giving habits have posed some challenges for groups that provide human services.
Jamie Phillippe, a senior official at the Chicago Community Trust, noted that in one downtown neighborhood with a large number of cultural institutions, giving has surged, probably thanks to an influx of wealthy new residents. However, groups that provide necessities to the poor and hungry haven’t done as well, she says.
In northern New Jersey, where many well-off people who commute to New York City live near blue-collar neighborhoods, the local United Way is trying to figure out how to persuade the wealthiest families to give more for basic services needed by the working poor.
The United Way of Northern New Jersey has suffered as companies that employed many of the area’s residents have been moving to other states, one reason the United Way raised considerably less last year, $14.5-million, compared with $25-million in 2000.
A decline of support from the biggest donors, those who give $10,000 or more, helped account for the United Way’s large drop in contributions. But revenue from people who give $1,000 to $9,999 jumped from 29 percent of total contributions to 39 percent.
John Franklin, the organization’s chief executive, is trying to figure out how to get more people to give more than $1,000 and to get all of the affluent to give more.
Working with researchers at Rutgers University, he was able to identify and highlight challenges facing the working poor. Donors are more willing to give when presented with data that show the difficulties the working poor face, he says, than when a campaign focuses on extreme poverty.
To reinforce the data, in March he invited 75 people who had given at least $1,000 to attend the play “Good People,” which highlights the situation of the working poor, and sat in on a post-production discussion.
Mr. Franklin’s efforts seem to be working. In 2010, nobody who worked at two major accounting firms in the region his United Way serves made a big gift. Last year, 65 donors at the two firms stepped up.
It’s harder for wealthy donors to see progress in human services than it is when giving to an opera or a school, Mr. Franklin says.
“When you tell them that [the beneficiaries] are working people who are paying taxes, who are your children coming out of college and they’re the people fixing your car, all of a sudden people realize that these are people they know, who are part of the social fabric,” he says. “There’s more sympathy for them.”
Justin Myers and Peter Panepento contributed to this article.
Editor’s Note: In this and other stories on How America Gives, we used ZIP-code data from the IRS to make comparisons between 2006 and 2012, the only years for which income and charitable donation data were available broken out by income and geography. However, to protect privacy, the IRS suppresses some ZIP-code data when there are fewer than 20 filers in a given income group. As a result, some figures are lower than what they’d otherwise be.
Since our original report, we’ve updated our interactive with county-level data for 2012, which do not have any data suppressed. Unfortunately, such data are not available for 2006.
Many of the figures used in this and other How America Gives stories are based on the original 2006 and 2012 ZIP-code data to make those year-over-year comparisons.
For the latest and most accurate 2012 data, see our interactive.
