Charitable Giving and the “Warm Glow”
It’s hard to ignore the news of slashed oil prices in Canada. Low oil prices have meant a break for drivers across the country, yet they have also resulted in negative economic impacts, particularly in Alberta. Now, that Province is attempting to make up for the shortfall by revisiting tax breaks.
News outlets report that the Alberta government has announced that, by 2016, the tax credit rate will drop from 21% to 12.75% for charitable donations exceeding $200. The Alberta government has rationalized that tax credits are not generally a main motivation for charitable donors. However, according to a Calgary Herald article published last week, charities in Calgary are worried that this measure will result in a drop in donations.
While charitable donors may continue to give, the tax credit dip clearly has the potential to adversely impact donations. It appears that taxes, in fact, are a factor when it comes to charitable giving.
Taxes also come into play when discussing charitable giving in the context of an estate plan. Recently, British researchers, in a report titled A warm glow in the after life? The determinants of charitable bequests, examined the behavioural science behind why people donate. Significant points made in the article include:
- most people would like to donate more than they currently do;
- people are more attracted to charitable pleas featuring a narrative – such as one individual’s story;
- people can be influenced by what their peers choose to do; and
- giving can be contagious – when people see others giving, they may tend to do the same.
Further, of note, was the finding of the Report that when considering wills, the likelihood of an individual choosing to leave gifts to charity doubles when the concept is suggested.
Thank-you for reading.