As all nonprofit people know, some types of charitable giving have a higher impact on the sector — and on our contributions to society — than others. And it just so happens that different approaches to the economic stimulus package are different in similar ways.
A wealthy individual who gives, let’s say, $1 million to a foundation, gets the same tax deduction as if she had given it to a community nonprofit. But the impact on community — whether in services, art, education or research — would be unmistakably faster and greater if she had given it to a nonprofit she knows. (If the foundation gives a typical foundation payout of 5% — $50,000 — that will be $950,000 less than if she gave it to a nonprofit. Right about here you might be thinking: yes, but the foundation will pay out 5% for many years. As Mark Kramer pointed out in Harvard Business Review, it will take more than 100 years for society to get the same value from a foundation gift as from a direct gift.)
One approach to the stimulus package is to give tax cuts to people and businesses so that they will both spend money and invest money. We in the nonprofit sector know that tax deductibility –a type of tax break — is a significant motivation only for the wealthy (even though middle class and poor people give higher percentages of their income), and that 44% of individual donations don’t go to nonprofits as we know nonprofits (34% goes to religion and 10% to foundations). A competing approach is to give stimulus funds to state and local governments and to nonprofits, which will spend the money on services, education and roads.Â
We shouldn’t take this analogy too far. But it’s worth remembering that we in nonprofits know a lot about different impacts of different kinds of funding influxes. Our voices should be heard calling not just for help to those suffering from the recession, but for strategic, high-impact use of stimulus funds — which we know to be to state and local governments, and to our own sector.
* This issue we have another First Person Nonprofit story from an Air Force captain who moved to a nonprofit, a Board Cafe article on speeding up board recruitment by pre-qualifying candidates, and a 3-minute vacation to the land of your dreams. Enjoy. — Jan Masaoka