Do Tote Bags or Charitable Deductions Help Giving?

Here’s yesterday’s installment of The Daily Stat from the Harvard Business Review:

DECEMBER 27, 2012
Why You Don’t Like Donating to Charities That Offer Thank-You Gifts
Research participants were willing to donate 38%
less, on average, to public broadcasting if the U.S. nonprofit offered a
thank-you gift, in this case a pen, say George E. Newman and Y. Jeremy
Shen of Yale University. A promised gift of a tote bag brought intended
donations down 17%.
A thank-you gift creates ambiguity in the donor’s mind about whether
the donation is supporting the charity or is a quid-pro-quo, the
researchers say.
Source: The counterintuitive effects of thank-you gifts on charitable giving

Frankly, thank you gifts have never enticed me to make a contribution to a not-for-profit organization.

In fact, they act as a reverse incentive on me, making it less likely that I will give.

Rightly or wrongly, I have a visceral reaction that goes something like this: If they can afford to give me something for my contribution, maybe they don’t need my money. Maybe, I think, they could save a few bucks and lower their cost of operation by not buying thank you gifts.

Now, I’m sure that at least some of the thank you gifts offered by not-for-profits are donated by corporate sponsors who, in turn, are able to write the donations off on their taxes.

But that raises another issue. Even though taxpayers, individual or corporate, would be crazy not to take advantage of the charitable deduction of our tax laws, I’m not a fan.

There are several reasons for this.

[To read the entire post, please go here.]

Author: MARK DANIELS

12 Comments

  1. Just keep in mind that a lot of research is supported by private endowments.

  2. Eh, this makes sense up until the ”OMG they’re gonna take away my right to believe in god!!!” stuff. I really don’t understand how we got from tote bags to some perceived attack on the bible.

  3. The thankyou gifts are offered because people like to advertise their charitable acts!! “See, I gave to ASPCA…I care about animals, here’s my tee shirt to prove it… etc”

    The fact that so many donations have dwindled due to them is a sign that the marketing/advertising people involved in these charitable organizations are missing the boat.
    I guess the emphasis has shifted to “go…and tell no one” as it says in the bible. Many give without thought of receiving in return or wanting to be recognized. Perhaps it is a sign we are evolving.

  4. Steph,
    Uh, I think you misunderstood. No one could ever take away a person’s right to believe in God.

  5. There are many different types of donors and each type of donor has his/her own reasons for giving. Some are true believers in the cause, some want a particular gift (which they may or may not consider a quid pro quo), some want the status of supporting a particular charity, some do it for friends, some do it for a sense of belonging and some do it for tax advantages combined with the opportunity to enhance their images. This doesn’t cover all the reasons.

    The most attractive donors are wealthy individual donors who can provide a gift in one check that would require hundreds of small givers to match. The large donor may or may not have a particular affinity for the charity. But, even if that donor has an affinity, the tax benefits matter. For each $6500 net, a large donor can donate $10,000. Put another way, $100,000 to the charity costs the donor only $65,000 after the tax savings. At the upper tax brackets, this matters. It may not affect whether there will be a donation, but it may affect the size of that donation.

    Gifts attract a different type of donor. The true believers don’t need gifts. Gifts are for the casual donor who otherwise would not give to that charity. Gifts help broaden the base at the cost of perhaps offending some true believers. PBS often runs musical acts as part of its “raise” month then offers a box set, not available elsewhere to attract donors that would not otherwise contribute to PBS. If properly explained, the true believers often understand the purpose of gifts. Gifts, like ASPCA T-shirts, can also form a sense of identity, image or belonging among certain types of donors.

    To accept the results of the research, I’d have to know who comprised the test group, the economic and charitable interest diversity of that group, and how they were selected. My experience is that successful fund raising is art, science and personal skills. It does not happen in a vacuum. Those “true believers” who insist that fund raising be “pure” will likely cost their charity financial resources that could otherwise expand the purposes of the charity.

  6. I’ve donated to PBS for years. If they have a gift I’d like, I up the donation to the amount needed to get the gift. The fact that they offer gifts doesn’t deter me in the slightest. This survey sounds flaky to me.

  7. I remember some talk years ago to the effect that the charitable tax deduction was being considered, (as perhaps it is again) among other tax deductions, for elimination as a means of raising revenue. I remember that churches and other charitable organizations were in quite a tizzy, all of them insisting that it would greatly reduce donations/offerings. This might have been as much as 30 years ago or more. I remember thinking then that it seemed a bit odd that people would only give offerings and donations if they could claim them on their income tax returns. I don’t want gifts for the very practical reason that I don’t want the “stuff.” Our house is paid for so because that was the bulk of what we had to itemize, we now don’t have enough deductions, charitable and otherwise to itemize, but it has no affect on my charitable donations, though I can imagine that some might donate in larger amounts because they can claim it at tax time.

  8. Momzworld,

    No moral judgment here, just an example of how the tax deduction can work for charities.

    Donor buys a stock for $25,000. Fifteen years later the stock has appreciated to $100,000. Donor donates the stock to a charity which sells the stock and receives $100,000 cash for its mission. Here are the tax benefits to donor.

    Donor gets to claim the “market value” of his donation as a deduction. In other words his tax exemption is $100,000. If s/he is in the 35% tax bracket s/he receives a $35,000 net benefit on stock that s/he only paid $25,000 to purchase. Much better than paying capital gains taxes had the donor sold the stock, paid the taxes and kept the remainder.

    This is not restricted to stocks. Appreciating artwork, jewlery, real estate or any other appreciating asset will do, though stocks are easiest to value.

    Other tax advantaged vehicles include charitable remainder trusts, charitable annuities, and even ordinary bequests in wills designed to reduce estate tax impact for the wealthy.

  9. I’ve donated to PBS for years. If they have a gift I’d like, I up the donation to the amount needed to get the gift.

    Me too The_Ohioan but then again some won’t understand or appreciate our reasoning… Or my Leo Buscaglia tee shirt.

  10. an injustice tidbits is that an artist who paints a painting worth veriied 100k on the art market, if donating such to a non profit, cannot deduct the value of the painting, only the materials. This ‘charitable deduction’ is only for the rich-rich of a certain kind. If you’re a writer, a scuptor, a painter of note, and want to go this route, y ou are out of luck. How did this happen and why I wonder?

  11. My Dear Esmeralda,

    Do you recall that name I used for you in the past?

    Our swords are not sharp enough to correct all injustice. The wealthy and the powerful have their privileges and their advantages. They are often the ones crafty enough to work the law to their ways. When their advantage reaches a point of excess visible to all, we sometimes find the courage to mass and pull back the prililege, though usually just a smidge.

    You are correct about artists. On my wall is the artist’s proof of a well known Southwestern/Native American limited edition. It was purchased at a charity auction. Likely the artist received the joy of giving, but no financial or tax reward.

    Z

  12. I admit I donated to WBGO, a jazz station to get a tee-shirt.
    I was never interested in any other “gifts”, but I do understand the logo lust factor.
    Now, I just want to contribute and not be bugged/called.

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