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Cost of Living Makes Big Difference in State Giving Rankings, Study Finds

By Harvy Lipman
2001


Taxpayers in rural southern and western states give the highest percentage of their earnings to charity, but a Chronicle analysis of newly released federal data shows that when the higher cost of living in urban states like New York and Illinois is taken into account, residents of those states donate a much larger share of their estimated disposable income than has previously been reported.

In California, for instance, taxpayers earning between $75,000 and $100,000 a year on average donated 2.6 percent of their adjusted gross income to charity. But when those taxpayers' incomes are adjusted to account for the state's cost of living, the share of their remaining disposable income given to charity rises to 7.1 percent.

Over all, Americans who itemized deductions on their federal income-tax returns gave a little more than 3 percent of their earnings to charity in 1999, a percentage that has remained unchanged for the past three years. Those taxpayers claimed a total of $122.2-billion in deductions for charitable donations in 1999, up from $107.4-billion the previous year. Taxpayers' charitable deductions varied widely across income levels and geographic regions. Among returns of taxpayers with adjusted gross incomes of less than $20,000, those who itemized deductions gave an average of about 11 percent to charity. Only a small number of taxpayers in that income bracket -- fewer than 6 percent -- itemize their deductions, however.

Those with the highest incomes -- more than $1-million a year -- claimed deductions for charitable giving equal to 4.6 percent of their total earnings. More than 90 percent of those taxpayers itemized their deductions.


State Comparisons

Comparing actual giving across income brackets and different states is difficult, because the percentage of taxpayers who itemize deductions varies considerably. That is important because tax and philanthropy experts believe that people who don't itemize give less -- both in terms of total dollars and as a percentage of income -- than those who do.

For the first time in its annual analyses of the tax data, The Chronicle took into account the varying costs of living in different parts of the country, subtracted living expenses from the total income within income categories for each state, and then computed what percentage of taxpayers' remaining -- or disposable -- income was claimed for charitable donations.

That new calculation did not make much difference in the state rankings for taxpayers earning more than $200,000. That result would be expected, given the limited effect that living costs like housing and food have on the wealthy. However, for taxpayers with incomes of $75,000 to $200,000, the new measurement drastically changes the rankings of states where most residents live in urban areas.



Utah Tops Rankings

In every income bracket, Utah taxpayers were the most generous. Researchers have generally ascribed the high giving rates in Utah to its high population of Mormons, whose religion requires that church members tithe 10 percent of their income to the church. Wyoming taxpayers with incomes above $1-million gave a slightly higher percentage of their income to charity than did those in Utah, but Wyoming's numbers are skewed significantly because only 78 percent of its highest-earning residents itemized deductions, versus 94 percent of Utah taxpayers.

However, when the cost of living is taken into account, several states move up significantly from where they would be ranked if those costs were not used to analyze giving. In the $75,000-to-$100,000 annual income category, for example, Maryland's taxpayers were the third most generous in the nation once their giving was adjusted for living costs -- up from No. 18 when the dollar figures were not adjusted.

Among the states whose rankings drop when living costs are factored in for the $75,000-to-$100,000 income category: Montana, which moved from 34 to 48, and West Virginia, which dropped from 29 to 46.

New Tax Break

The vast majority of taxpayers, however, do not itemize their deductions and therefore cannot receive any tax benefit from making charitable donations. The House of Representatives last month passed legislation that would allow taxpayers who do not itemize to claim charitable deductions of up to $25 in 2002; the amount would be double for couples filing jointly.

The Chronicle analyzed giving by lower-income taxpayers who do itemize their deductions, and found that those with incomes of less than $20,000 gave an average of about $850. Those with incomes of $20,000 to $30,000 donated an average of $1,280, and those earning between $30,000 and $50,000 gave an average of $1,525.

Patricia Read, a vice president at Independent Sector, said her group's research shows that low-income taxpayers who itemize deductions donate about $300 annually to charity, while those who do not itemize give only about $30. That, she said, is because taxpayers in lower income-tax brackets who itemize deductions tend to be wealthier, retired people whose taxable income is low.


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From 2003, same source - The Chronicle of Philanthropy


80 Percent of Donations




The Chronicle's studies of giving by city, county, and state are based on Internal Revenue Service records of Americans who earned $50,000 or more and itemized their deductions, representing 18 percent of all U.S. taxpayers and accounting for nearly 54 percent of all money earned in the nation. Those taxpayers donated $97-billion to charity, about 80 percent of the total $122-billion donated by all individuals in 1997, according to estimates compiled by Giving USA, the study of charitable giving published by the AAFRC Trust for Philanthropy. Since people who don't itemize don't report their donations, little reliable data are available on people who make less than $50,000.






 
 
 
 
 
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