Presented (3:00 pm EST) February 14, 2012, to the Canadian House of Commons Standing Committee on Finance, Pre-Budget Consultations.
The great issue of our day is whether we can order our world with flourishing institutions apart from government and markets. This is the key question behind the very taxing challenge facing the Houe of Commons Standing Committee on Finance today.
The future of charitable giving, and the vibrancy of the charitable sector, will be influenced much more by social and cultural conditions than by the limited tools available to government. Tax incentives comprise only one such tool, but they constitute a powerful tool. We must use them in the very best way we can.
As tax tools go, Canada's charitable tax credit is one of the most successful ever implemented. It is a two billion dollar investment that may be our most effective lever available to animate more than 80,000 charities across Canada.
The charitable tax credit represents less than one percent of the whole federal budget. Yet is treated like the oil of Elijah that, as the Old Testament tells us, never ran out.
Indeed in 2008, based on the Canadian trend of increased population and higher incomes, the federal government estimated a charitable tax expenditure for 2010 of slightly less than three billion dollars. Clearly, it expected more Canadians to give more—to help replenish the oil of Elijah if I can put it that way.
On the contrary, the charitable tax credit expenditure for 2011 actually went down compared to 2005. Why? Simple arithmetic. More Canadians were giving less, or not at all.
We can all see the arithmetic on the wall: unless Canadians have a greater motivation to give, something in the charitable sector itself is going to give. It simply cannot continue doing more with less indefinitely, particularly when "less" really means "less" than the government itself forecast.
If I might digress briefly, I have the privilege of sitting on Minister Diane Finley's advisory council for social partnerships. We are advising the Minister on social innovation and social enterprise initiatives to leverage the work of government and others. Let me assure you, committee members, that if we discovered a three billion dollar idea able to become a powerful fuel cell for every charity across the country, we would be leaping for joy right over to Minister Flaherty's shop. We would have every confidence it would be right up there in the highlights of our upcoming budget.
What I am really talking about is a strategy to shore up the great work of Canada's civic core—a small but amazing part of our society. I am asking this committee to tell participants in the civic core that government is behindthem; that it will help them to do even more. I am asking you to simply increase the charitable tax credit.
In the meantime, the deep social and cultural questions that really motivate our care and our love for our neighbours must become the next great debate in our country. If this does not happen, no tax incentive will help.
By advising you that you should support increasing the charitable tax credit, I am telling you something many others have also spoken up to support. There are many great ideas out there to complement Cardus' strategy. There are also some that, unfortunately, are not well enough developed to measure up just yet.
I respectfully suggest that the stretch tax credit is one proposal that is not yet ready for you to seriously consider. Here's why:
- As it stands, it is not a policy that is material to the whole charitable sector
- It is too experimental
- It is biased to the spontaneous, rather than the planned, giver
- Getting your young, male Bay Street lawyer to donate more than he spends at the pub with his buddies on a Friday night is a cultural task, not a tax strategy
- Attracting new donors through tax incentives is a stab-in-the-dark strategy.
- Everyone who raises money, and that would be most of us at this table, knows the best way to receive a donation is to ask someone who already donates
- And, except perhaps for Canada's charitable giving leaders living in Abbotsford, B.C., Canadians who already give have room to give more. We just have to motivate them to do so.
In contrast to the stretch credit idea, Don Johnson's plan for the removal of capital gains on the gifting of real property is a great idea, primarily because it is so easy to do. Extending it to privately held shares, however, well, that needs a bunch more work.
It has one other drawback as well: the giving of capital already receives more benefit than the giving of income, which is a disincentive to those who have no appreciated capital to give.
Maybe it is time to send an encouraging message to the middle class that their charitable works are equally worthy.
Cardus has done extensive research on the nature of generosity, on the health of the civic core, and on the importance of institutions mediating between government and the market. It is our considered opinion increasing the charitable tax credit is the best idea of the other ideas on the table.
It is best because it is simple. It is best because of its message of support to the women and men and who give their money, time and hearts out of love for their neighbours.
Thank you for your attention. I would be happy to answer any questions you might have.