Wealthy Donors Could Increase Giving by $107-Billion, Nonprofit Group Says

Donors who had an adjusted gross income of $100,000 or more last year could have increased their contributions to charity by a total of $107-billion in 2003 without affecting their standard of living, according to estimates in a report by the NewTithing Group, a San Francisco nonprofit organization that encourages wealthy people to donate more to nonprofit organizations.

The charity believes that many wealthy Americans decide how much they can afford to give based on their annual income — perhaps tithing a specific percentage of it — without taking their investment assets into consideration.

“In today’s modern world, there are a lot of people who have more assets than they do income,” says Tim D. Stone, executive director of the NewTithing Group. “So if some people are using the tithing formula for figuring out how much to give to charity and they have a lot more assets than they have in income, then that might mean that they’re giving a lot less than they can comfortably afford.”

The report estimates that giving by individuals in 2003 totaled $184-billion, but says that figure could have been $291-billion if wealthy donors had given all they could afford to contribute.

Gains in Wealth

NewTithing estimates that, despite three down years in the stock market, the number of wealthy people in the United States and their net worth grew substantially from 1997 to 2003. The report says the number of taxpayers with adjusted gross incomes of $100,000 or more increased from 7.2 million in 1997 to 12.4 million in 2003, and that those taxpayers’ aggregate assets rose 44 percent, to $12-trillion.

The report’s calculations are based on Internal Revenue Service data from 1997 through 2000, the most recent years for which information is available. Estimates on the number of people who filed tax returns and their incomes for 2001 through 2003 were provided by the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution, two Washington think tanks.

In its research, NewTithing has also found that wealthy donors are not taking full advantage of the tax benefits of donating stock, artwork, and other assets that have risen significantly in value from the time they were purchased. The tax code allows donors to deduct the full market value of those assets, thereby allowing donors to avoid paying capital-gains taxes on them. The group’s analysis of Internal Revenue Service data for 2000 found that taxpayers with adjusted gross incomes of $100,000 or more sold appreciated assets for taxable gains at the same time that they were donating cash to charity. The report says that donors in those tax brackets could have avoided $2.7-billion in capital-gains taxes if they had donated appreciated assets instead of cash.

Giving Guidelines

The organization recommends that donors give a specific percentage of their total investment assets — from 0.6 percent to 3 percent, depending on the size of their holdings — and that they also donate the amount they saved on their tax bill because of the charitable deduction and what they would have had to pay in capital-gains taxes had they not made the gift.

For example, the report says that donors with assets of $500,000 or less can “comfortably” afford to make charitable contributions equal to 0.6 percent of their assets. Someone with $500,000 in assets, for example, should allocate $3,000 of those assets for charitable giving, according to the report, plus an additional $1,784, the amount the donor would save because of the charitable deduction and by avoiding capital-gains taxes, for a total gift of $4,784.

In separate research, the organization analyzed aggregate data from the Internal Revenue Service on the wealthiest 400 taxpayers and found that their average annual income increased from $10.9-million in 1997 to $29-million in 2000. During the same time those donors’ average total assets rose from $352.4-million to $683-million. NewTithing says that as a group those donors could have donated an additional $19-billion to charity between 1997 and 2000 without changing their way of life.

As part of its effort to encourage more giving, NewTithing has added a giving calculator, the PrudentPal Charitable Giving Planner, to its Web site, to help donors develop giving plans based on numerous factors, including their investment assets, income, debt, investment returns, and asset mix. Donors can build their plans based on their giving goals — such as donating a specific sum or giving a percentage of their assets plus the projected tax benefits — or based on their goals for their portfolio — such as trying to stay ahead of inflation.

Claude Rosenberg, the philanthropist and retired investment manager who founded NewTithing, believes it is crucial that donors make gifts as sizable as they can now, rather than delaying. “There is no time like the present, because a donation now can have greater impact than that same donation later,” Mr. Rosenberg writes in the report. “Societal ills generally increase at an exponentially greater rate than does return on capital.”

The report, “Wealth and Affordable Donations in Uncertain Times: Trends in Income, Assets, & Charitable Giving 1997 through 2003,” and the PrudentPal Charitable Giving Planner can be found online at http://www.newtithing.org. For more information, contact NewTithing Group, 1 Market Street, Steuart Tower, Suite 2105, San Francisco, Calif. 94105; (415) 274-2765; general@newtithing.org.