Americans More Charitable than British?

[kevin_standlee]

Cheryl pointed me at this news item:

Why do wealthy Americans donate so much to charity and rich Britons so little?

It's a shame that UK law doesn't recognize most of the classes of organizations that in the US would be "501(c)(3)" tax-exempt organizations to whom donations are considered charitable and also tax-deductible.

As I understand it, there is a British equivalent to what Americans call a "non-profit"* -- the "company limited by guarantee." Interaction's parent corporation (of which I am/was a director), UK 2005 Ltd., is such a legal entity. But it's not what the British call a "charity" and it's neither tax-exempt nor do donations to it get you a tax deduction.

Many American conrunning non-profit corporations like SFSFC, MCFI, SCIFI, etc. are both non-profit (or equivalent) corporations in their respective states and also 501(c)(3) tax-exempt organizations. There's a tendency to toss around "non-profit" and "501(c)(3)" and "charity" as if they were interchangeable terms, but they're not -- they all have subtle differences in meaning. In any event, 501(c)(3) organizations do not have to pay income tax on any profit (call it a "surplus" if the technical term for excess of revenues over expenses bothers you), and donations to such organizations are considered charitable donations, and you're allowed to deduct such donations from your income for the purpose of determining your personal income tax.

If UK law allowed the wide variety of organizations that can qualify for US 501(c)(3) status the same benefits as UK charities, I expect the British giving levels would be a bit higher.

__________
*"Non-profit" and "not-for-profit" are functionally equivalent terms. I've never found any substantive legal distinction between them. It appears to me that the term one uses primarily comes down to the state in which you live and the semantic sensibilities of whoever drafted that state's constitution or corporate legislation. California's formal name for incorporated groups of this nature is "California Public Benefit Corporation."

Comments

[paradoox.livejournal.com]

Or maybe if the British tax rates were lower so people had more money to give?

I.E. Britons may feel they are already donating enough by paying their taxes.

[mishalak.livejournal.com]

Or perhaps if they were more religious, since the vast majority of money donated to 'charity' in the US is given to churches for their upkeep and paying the preachers. Churches get more than half of all charitable giving even if you count church run social services as social services rather than donations to religious advertising.

Also some of the lowest giving rates are in low tax states like New Hampshire.

Points taken

[paradoox.livejournal.com]

OK, I didn't think about the church / religious issue since we don't give much to churches. We will give to churches for directed donations (memorials) and a couple of other cases.

Re: Points taken

[mishalak.livejournal.com]

Nothing wrong with organized religion, I'm thinking of getting in with something like the North Texas Church of Freethought myself, I just think that it should not count like giving donations for poverty relief does. Though Kevin covered that in more detail than I could.

[kevin-standlee.livejournal.com]

Actually, I think Americans probably are paying either about the same or maybe even more in taxes; it's just cut in different ways. My marginal income tax rate (combined federal + California state) is higher than it would be for the same income in the UK. Yes, sales tax in California is less than UK VAT, and there are specific excise taxes such as the heavy taxes on fuel that are higher than the UK, but I wouldn't be so sure that the net tax load as a percentage of income isn't that much different.

US public policy amounts to making support for the range of interests broadly defined as "charities" a matter of individual choice by subsidizing it through tax policy -- that's what the charitable contribution deduction is -- as opposed to the government taking in the money and deciding what charities to endow.

Mind you, US public policy defines "charity" very broadly. It appears to me that folks in the UK boggle at the very idea that activities such as organizing SF conventions or running preserved railroads could possibly be considered "charitable." Moreover, the US "charitable" definition is shorthand for a lot of things that are broadly considered cultural enrichment in some way, including educational, which is the portion under with SF groups usually qualify.

[mishalak.livejournal.com]

Don't forget the National Health Service over there. It is a tax, but for many people is reduces their total spending on health care.

Personally I think the best way to compare tax load is to subtract out National Health and then compare the percentage of GDP that is government spending. In which cast then you're right. UK is about 36% of GDP in total with a good deal of that, 11% of GDP in total I think, as health care. US average is 33% of GDP.