Charitable Giving In Canada

Commentary, Manitoba, Poverty, Rebecca Walberg, Taxation

A newspaper editorial recently raised a troubling issue: Canadians, among the most wealthy and privileged people in the world, give a shamefully small amount to private charity – 1.2% of income, compared to 2% in the U.S. The author correctly notes the inverse relationship between taxation rates and charitable giving. But the recommendation that we give more to charity so that the government can pare back its spending and taxes misplaces cause and effect. Only after tax levels decline will we give more.

Beyond the fact that bureaucracies rarely cede powers of their own volition, this analysis misconstrues the nature of the problem. Governments do not spend because individual Canadians will not. Rather, after paying federal, provincial, municipal, sales and payroll taxes, taxpayers do not have the means to direct resources to charity.

Providing for one’s own family takes precedence over altruistic impulses. Not only do Canadians take home less money to donate, they are also asked by charities to give disposable income to causes already subsidized through taxes. Canadians pay municipal taxes for schools and then children appear at the door to ask for additional donations; they pay provincial taxes and then face a bombardment of mass mail exhorting secondary support; they pay federal taxes and then are solicited for foreign aid to help people the Canadian government has also pledged to help. Requests for charitable giving to support the causes insufficiently championed by our leviathan state add insult to injury.

Schools perform better when they depend upon results and satisfied parents for funds. Patients receive better medical care when providers have incentives to treat them quickly and effectively. Equally charities accountable to donors, who decide year-to-year if good ends are achieved, perform better than groups that rely upon a steady stream of taxpayer dollars with few strings attached. Government aid to countries in crisis typically comes in the form of props for dysfunctional governments, too late to have much effect and with too little getting through to victim groups. Private charities achieve better results at lower cost than the public sector in areas ranging from prison outreach, to famine relief, to disaster response.

Giving Canadians the power to choose which charities to support is the right course of action. It is also the pragmatic one. If governments restricted themselves to their core functions, the tax burden on all Canadians would radically decline and discretionary income would rise. This demonstrably increases both the proportion of money citizens give to charity and the absolute amount of money they donate. As the editorial noted, charitable giving in Alberta is on average three times higher than in Québec. That Alberta has the smallest government and lowest tax rates, and Québec the greatest, is no coincidence.

Government involvement in philanthropy is also bad psychology. Public money crowds out private donations, and excessive taxation and the resulting loss of discretionary income further discourages individuals from giving. But another effect of relying upon the state to organize what used to be voluntary is to transform an individual responsibility into a collective one.

The illusion that the government is ultimately responsible for taking and then giving money for charitable causes deters private philanthropy because people believe their moral responsibility to help others has been seconded. Taxpayers can be forgiven for their perception that the state, with its massive bureaucracy and power, is doing what must be done, and that they are doing all that is required of them by paying their taxes.

Canadians are blessed with a prosperous and secure nation. We should share this wealth with the less fortunate within our borders and around the world. The best way to do this is to lower taxes, to let Canadians decide how their dollars are best spent, and to make charities directly responsible to the people who fund them. Only then will Canadians have the ability and the inclination to give more to charity.