Stapleford
Guest Columnist
What’s happening?
According to IRS data compiled from 1040 Forms, total household charitable giving in Delaware has fallen from a peak of $548 million in 2006 to $478 million in 2013 “¦ unadjusted for inflation. The total Delaware households recording charitable contributions has similarly dropped from 134,000 to 119,900. And charitable giving per household tax return has not yet recovered to the pre-recession peak.
To make matters more difficult for Delaware’s nonprofits, the rebound in total individual charitable giving is modest relative to the U.S. and the giving per tax return lags even further.
Why is it happening?
All charitable giving – individual, foundations, business – is sensitive to the business cycle. Individual charitable giving, approximately three quarters of all charitable giving in the U.S., is especially volatile over the business cycle. As seen with household consumer debt, it takes a number of years for households to have enough confidence in their economic situation to return to higher levels of charitable giving.
Personal income taxes have played a significant role in the poor recovery of Delaware individual charitable giving relative to the nation. In 2009 the top Delaware personal income tax rate was increased from 5.95 percent to 6.95 percent, and today stands at 6.6 percent. The top rate kicks in at household income of just $60,000, making Delaware’s personal income tax one of the most progressive in the U.S.
The natural reaction of higher income households has been to move from Delaware or change their place of residence to second homes in states with no income tax (e.g., Florida). The data shows that individual charitable giving from Delaware households with income of $200,000 and over has declined faster than total individual charitable giving in the state. The percent of charitable giving accounted for by these high-end households has dropped from 40 percent in 2006 to 32 percent in 2013.
The implications for business
With individual charitable giving down and the demand for social services up, Delaware nonprofits are strapped to balance their budgets. They can be expected to be more aggressive in attempts to raise funds from the business community. In addition, to the extent that the lack of funding diminishes the nonprofits provision of services, the state government will have to stand in the gap. This means reduction in Delaware state business taxes is unlikely.
Dr. John E. Stapleford is consulting economist with DECON First. Contact him at john@deconfirst.com
