I am a strong believer in philanthropy. Deciding to give a percentage of income to charity, even as we walk through life's changes and disruptions — starting businesses, building careers, having children, educating them — is a commitment to hold to our charitable objectives.
But being charitable and being generous may be two different things.
The financial benefits of charity are directed to those who can most afford to give. This is especially true with the new tax laws. Charitable gifts are deductions from your taxes, but only if you itemize. The increased standard deduction means fewer people are going to itemize their deductions. Those who itemize will most likely maximize their property and state income tax deductions at $10,000, and have a fair amount of mortgage interest and significant medical deductions. For married couples under age 65, the standard deduction is $24,000. So your charitable contributions are not really deductible until your itemized deductions are over $24,000!
People who make more money are more likely to itemize because they often easily fill up the property tax and state income tax bucket and tend to have larger mortgages. Even if they give a small percentage of their income to charity, this will push them over the standard deduction. Worst case, they can bunch their charity so they can itemize every other year.
People in higher tax brackets, while they pay more in taxes, also have the government as a co-contributor to their causes in the form of providing tax savings at the marginal bracket. If you are able to itemize but in the lowest tax bracket, the government is providing you a 12 percent subsidy; if you are in the highest bracket, they provide support at 37 percent. Those with appreciated investment assets can donate stock rather than cash and avoid the capital gains tax.
To the extent that the government is subsidizing these gifts, then they are also a partner in where those gifts are going. Whether the gift is to the National Rifle Association or Planned Parenthood, the government is in effect a major donor. While it is true that any of us get to pick the causes we wish to support, the government is only helping those who itemize. The higher income taxes that higher bracket taxpayers pay support government programs, but it is not at their direction.
In his book, "Winners Take All, the Elite Charade Of Changing the World," Anand Giridharadas writes, "The people with the most to lose from genuine social change have placed themselves in charge of social change, often with the passive assent of those most in need of it." The fact that we may feel uncomfortable with many of the ideas that he goes on to propose probably means that there is a certain amount of truth in his statement. Would donors give away the same amount if they derived no financial benefit? And are those who are seeking support complicit in this potentially unholy alliance?
My wife and I have participated in charity for a number of reasons, but our starting point was that regardless of how little we may have had, we were appreciative of that which we did have. The financial hardships that many of us may have experienced felt real to us at the time, but most of us have not had to live on the street, to make decisions about which debts to delay paying, or to deal with the emotional impact of bankruptcy. None of us can ever know what someone else is going through financially and we rarely see the vulnerability of those we think we know.
While we may not always be in a position to be charitable, we could almost always be generous.
Many of us have felt frustrations around helping people who we don't feel are appropriately appreciative of our actions. But if we gave solely because we felt right in doing it, would it matter how the gift was received? Giving without expectations may be acts that make us feel even better because we are doing it solely from our heart.
There are other ways that we can be generous that may not be charitable. What if we volunteered for someone else's pet cause? What if we listened more than we talked. What if we treated everyone as if they really mattered? This type of generosity is universal — the more of it we give, the more that works its way back to us.
At its core, generosity is about kindness. Regardless of our charitable commitments, we could all use a little more generosity.
Ross Levin is the chief executive and founder of Accredited Investors Wealth Management in Edina.