San Francisco – April, 2004 -- Individual charitable contributions would have been $41.6 billion higher if tax filers earning $200,000 to $10 million in adjusted gross income AGI had donated as high a percentage of their investment asset wealth to charity as did everyone else, concludes NewTithing Group, a non-profit philanthropic research organization in a study of the latest available IRS data from tax-year 2001. Separately, an additional $659 million could have also been donated to charity instead of paid in taxes if affluent filers had replaced their cash donations with the long term appreciated assets that they sold for taxable gains, the Group estimates.
     The study suggests that if the “upper middle class” and “middle rich,” with average assets of $1.7 million to $46 million, had donated as high a percentage of their asset wealth to charity as did lower wealth groups, total individual giving would have been 23% higher in 2001, an increase of $41.6 billion. The most pronounced difference in generosity was between filers with adjusted gross incomes of $200,000 to $500,000, and filers with $75,000 to $100,000. While average filers in the less affluent group donated approximately one percent of their investment asset wealth to charity, their wealthier counterparts donated less than half of one percent. Aggregate data for the two groups reflected a similar generosity gap: Although the wealthier group owned in aggregate nearly twice as much in estimated investment assets, their less affluent counterparts donated a total of 21% more to charity, topping the higher group by $3.26 billion more.
     Measuring charitable donations as a proportion of investment assets provides a meaningful gauge of the giving capacity of the wealthy, whose investment assets generally dwarf their income.
     By analyzing IRS data on both realized net gains and cash donations, the report also details how average filers with $1 million or more in adjusted gross income failed to take full advantage of the tax benefits of charitable giving. If such filers had replaced their cash donations with the long term appreciated assets that they sold, they would have avoided capital gains taxes of over half a billion dollars in 2001. Filers could have either kept a combined $659 million, or gifted that sum to augment their charitable donations. A convenient alternative to donating cash and selling appreciated assets would have been to gift long-term appreciated assets into a donor-advised fund (at a community foundation or financial institution), or family foundation. This strategy would have: avoided the inconvenience of donating long term appreciated assets to many different charities; avoided taxable gains from the sale of long term appreciated assets; secured a charitable deduction; and facilitated gifts from the donor-advised fund or foundation to the charities of a donor’s choice.
     NewTithing Group’s PrudentPal Charitable Giving Planner allows users to calculate the tax advantages of donating long-term appreciated assets. The web-based resource also provides a host of giving strategies to help donors, investors, or their advisors decide on a maximum comfortably affordable donation for the current year. Freely accessible at www.newtithing.org PrudentPal is licensed to organizations committed to donor education.
     A non-profit organization specializing philanthropic research, NewTithing Group is chaired and founded by philanthropist and retired money manager Claude Rosenberg, who devised Rosenberg’s rule: “A donation made now may have more impact than a donation later because societal ills generally expand at an exponentially greater rate than does return on capital.”