Giving Goes West

Charitable deductions increased 11 per cent nationwide in 1996

As Americans are moving west, so is their philanthropy, a Chronicle analysis of new Internal Revenue Service data finds.

From 1992 to 1996, the total amount of charitable deductions claimed by taxpayers in 13 Western states climbed by 31 per cent, accounting for inflation. During the same time, charitable write-offs for all Americans grew by 20 per cent — to $85.2-billion.

One reason that states in the West are leading the increases in charitable deductions: More people are living in that region than before.

As the number of residents in states such as Nevada and Arizona grows, for example, so does the number of taxpayers in those states who may take write-offs for gifts.

From 1995 to 1996, the number of Americans claiming charitable deductions grew by about 3 per cent overall. During the same time, the number of Nevada taxpayers who wrote off their charitable gifts grew by nearly 11 per cent.

“In Nevada, there is an increase in people and there’s an increase in philanthropists,” says Jennifer McGee, executive director of the Nevada Community Foundation, which has doubled its assets in the last two years, to $10-million.

“People aren’t just moving here,” Ms. McGee says. “They are becoming a part of our community and moving their philanthropy here.”

According to the Chronicle’s analysis of the I.R.S. data, Nevada saw the second-largest increase in total write-offs of any state — 29 per cent, to $561-million.

Among other findings:

* Wyoming saw the biggest increase in total contributions from 1995 to 1996 — jumping 51 per cent, to $178.8-million. Giving by the wealthiest residents of the state appears to have fueled the rise. Among taxpayers earning at least $200,000, total deductions had more than doubled, to $110-million in 1996.

* Taxpayers in 12 Midwestern states reported the smallest jump in total write-offs in any region from 1995 to 1996 — 9 per cent. Taxpayers in both the Northeast and the South saw deductions rise by the national average — about 11 per cent.

* People in California — the most populous state and the state where the most tax returns included charitable deductions — took the most in write-offs. They claimed deductions totaling $10.9-billion, followed by New Yorkers, who wrote off $8-billion.

* North Dakota, one of the least populous states (and with one of the least number of itemized returns), reported the least amount in write-offs — $115-million.

* No state reported a decline in total write-offs from 1995, but three sparsely populated states — Montana, Alaska, and North Dakota — saw the smallest increases — of 2 per cent, 3 per cent, and 4 per cent, respectively.

Charity observers look to the I.R.S. data to find trends in giving around the country. In Massachusetts, an annual report called “The Catalogue for Philanthropy” — which is intended to encourage more giving among residents — uses the data to issue a “generosity index.”

Based on the I.R.S. figures, the index compares the average income of taxpayers in a state with the average charitable deduction taken by taxpayers who itemize their gifts. Poor states with relatively high write-offs, for example, rank high. The index does not include the District of Columbia.

Arkansas, with the third-lowest average income and the fifth-highest average deduction, ranks No. 1 in the generosity index. Massachusetts, the third-wealthiest state and ranked 43rd in average deductions, is at the bottom of the index.

George McCully, a trustee of the Ellis L. Phillips Foundation in Boston, who coordinates the Massachusetts project, calls the index a “crude but telling” analysis of giving trends. He points out that three of the top five states are in the Southeast and that four of the five states at the bottom of the list are in New England.

“This makes sense,” he says. “The Southeast is extraordinarily generous, not only because of the Bible belt but because we associate warmth and generosity more with Southern culture than Northeastern cultures.

“The New England cluster makes sense, too, because of our traditions of Yankee thrift, of self-reliance, and perhaps of secularity.”

Other charity experts agree that such community attitudes and practices, along with religious traditions, are often good indicators of how much money residents of a certain state or area will give away. A region’s economy and how urban it is — since big money often comes from people in big cities — may also point to how generous residents will be, they say.

Such factors are important to consider. While the I.R.S. figures are thought to represent the majority of the money Americans give to charity, they do not include all gifts. The data cover only those taxpayers who itemize gift deductions on their federal returns.

Of the roughly 121 million returns that were filed for 1996, about 32 million, or approximately one in four claimed charitable deductions.

Estimates vary widely about how big a percentage of total donations are made by those who itemize. One popular measure of American generosity — the American Association of Fund-Raising Counsel Trust for Philanthropy’s Giving USA — estimates that Americans gave a total of $102.3-billion to charity in 1996. Deductions taken on federal returns that year accounted for more than 80 per cent of that total.

Still, using the I.R.S. figures to make state-by-state comparisons can be tricky, in large part because the percentage of taxpayers in each state who take write-offs varies so widely.

In Maryland, for example, 38 per cent of the taxpayers itemized their charitable gifts in 1996. In South Dakota, fewer than 12 per cent did so. That means that the I.R.S. giving data covers about four out of every ten Marylanders, but only about one out of every ten South Dakotans.

Depending on how average deductions are calculated then — based on the number of all taxpayers or on the number only of those who itemize — two very different pictures of generosity by state may emerge.

Counting only those who take charitable write-offs, people in Maryland gave an average of $2,438 in 1996. That was less than the average among itemizers in Washington, D.C., and 31 states, including those in South Dakota, who gave an average of $3,191 and ranked No. 11.

If all taxpayers are included in the calculation, Marylanders shoot up to the No. 4 spot — each giving, on average, $929 to charity. The average gift among South Dakotan taxpayers becomes the second-smallest in the country — $374.

Utah residents, many of whom belong to the Mormon Church, have perennially been No. 1 in terms of average contributions per returns that claim charitable deductions. It is widely believed that the church’s strong tradition of tithing helps explain why contributions there are usually the highest in the country.

But in 1996, Wyoming came out on top with an average deduction per itemized return of $5,822. Utah came in second with average gifts totaling $4,845.

But Wyoming’s country-leading average may be misleading.

Other factors must be considered: Fewer than 14 per cent of the returns in Wyoming included write-offs, versus more than 32 per cent in Utah. And, in Wyoming, 42 per cent of the total amount of write-offs were claimed by taxpayers who reported earning at least $200,000 in 1996. In Utah, only 18 per cent of the deductions came from those taxpayers.

John Freeman, executive director of the Wyoming Community Foundation, says the average deduction doesn’t necessarily reflect the generosity of the average taxpayer in the state. Instead, what it may show, he says, is “that there is a very small group of extremely wealthy individuals who are making very substantial gifts.”

The I.R.S.’s state-by-state data are available in the agency’s Statistics of Income Bulletin for Spring 1998. The report may be obtained for $18 from the Superintendent of Documents, U.S. Government Printing Office, P.O. Box 371954, Pittsburgh, Pa. 15250-7954.