Two columns generated a lot of good feedback recently — the one on the Motley Fool “Dogs of the Dow” strategy, which I’ll revisit tomorrow, and the one about why the rich don’t give more. As I often find your comments a lot more interesting than mine, I wanted to share some of what you had to say:
“I think your correspondent is right on the mark. I especially agree with his first point, that rich people do not see themselves as rich.
“This is an issue I constantly struggle with. My husband and I are not rich (just like the people your gentleman talks about). We are typical DINKs; he earns about $80,000 per year and I earn about $55,000. We make another $15,000 on investments and have a net worth of something like $500,000. I feel we are well able to help others, both with our money and with our time. My husband, however, was not taught as a child the obligation to help others less fortunate; getting him to agree to contribute time or money is always an uphill battle. We have adopted a ‘what he doesn’t know won’t hurt him’ policy and, since I control the checkbook, I just do what I feel is right. Whenever I volunteer my time at my chosen non-profits I have to endure his disparaging comments.
“Your correspondent hits the nail on the head. The best way to engender support for a cause is to somehow make the cause personal to your targeted donor. Please do not use my name if you quote the financial information included here.” — Anonymous
“Your friend says he’s not racist, but confesses he makes powerful and negative emotional distinctions based on race. If that isn’t a form of racism, what is? Agreed, perhaps it’s human nature to be afraid of the ‘stranger’ and to be ethnocentric about one’s own group, but it’s human nature to do and think a lot of rotten things. And the more matter of fact someone is about them, the more it [allows them to continue]. As good and kind and generous as your friend obviously is, he ought to be — at least a little — ashamed about his coldness about suffering when it happens in Burundi as opposed to when it happens in Cracow.” — James Glickman
“I agree with your anonymous friend about the size of Asians’ donations being less compared with their relative success. I have often made the same point myself — see for example: www.nssl.uoknor.edu/~lakshman/Sane/newyr.html.
“However, in our defense, I should mention a couple of things. Since Asians are, by and large, recent arrivals in America, ties to the homeland remain strong. Giving among Asians (Indians at least) is mainly personal — when you know so many poor people like I do, it is hard to give to an anonymous organization like the Red Cross. I would rather help to pay the college tuition of a kid in my village. Such donations do not show up in your friend’s radar screen since a) They are not claimed as deductions on a tax return. b) They do not go to any named charitable organization.
“That said, we can do more though.” — Lakshman
“My company (Sabre Group Inc. (TSG) formerly a division of American Airlines) makes it easy for me to donate by making payroll deductions in every paycheck to give to United Way. I don’t feel the pinch so much because it is deducted before money is deposited to my bank account and it is spread over the entire year. Regarding your friend’s comments on Asians tending to give less: I don’t think it has anything to do with the absence of the Judeo-Christian heritage as he suggested (charity is extolled in all cultures). It is partly because of the earlier reason he gave viz. identification. They can identify more easily with poor people in their home countries than they can with the needy here. Also, many Asians (including me) regularly send contributions (not tax deductible in the U.S.) to charities and development projects in our home countries. This more or less satisfies our urge to give. That may explain, at least partly, why Asians seem to give less here in the U.S.” — Jambardi Maheshkumar
“Your friend’s statements are absolutely correct. ‘Rich’ is very relative word. You might not think you are rich, but others who have less may think so. Asians (mostly) believe in direct giving (where they can feel the pleasure of someone saying thank you). If you ever go to India, see how many people give to beggars. Often News Media reports beggars having millions of rupees (Rs 36 = $1) in their bank account. It has become a profession in major cities and beggars fight for key spots, even bribe the police for it.
“Personally, I’d not give to United Way no matter how much I have, nor my alumni association or college, because I do not want to support their overheads, even though I think they do a good job. Sorry, but I’d rather hear and feel the thanks of a homeless and hungry.” — Vijay Sinha
“I am just curious (as a poor person who is tired of the male-bashing and the rich-bashing) what are those ‘after-tax percentages terms’ referred to in the beginning of the article and who is ‘everyone’ else? Of all of my fellow everyone else’s, most are just living paycheck to paycheck. We have discussed charitable contributions in the office and very few admitted to doing it at all. This article seems to imply that working class is out there contributing 20-30% of their income while those rotten rich are only giving 10% (on top of the added 50% in taxes mentioned in the article which comes to a remaining 40% to live on for those rotten rich.) How much do we poor working class actually give? I don’t know anyone who lives on 40% of their gross earnings, that’s for sure!” — Rene
I think the reason low-income people tend to give more percentage-wise than rich people — especially after factoring in the tax advantages to the rich — may be the collection box at church. Someone who earns $20,000 a year and manages somehow to stick in $10 a week is giving a lot more, relatively speaking, than someone earning $300,000 who writes a check for $1,000 or $2,500. And as a percentage of “discretionary income” (the amount available after paying taxes, rent, and other basics like food and utilities), that $10 a week at church may represent a HUGE chunk. Very few rich people give a huge chunk of their discretionary income, quite possibly because (as my friend suggested in point #3 of his message, and you do, too) they feel they already “give” a huge chunk to the tax man.
According to the IRS, the average itemized charitable deduction in 1994 was between $1200 and $1800 for itemizers who reported adjusted gross income between $15,000 and $75,000. That’s pretty good, considering how tough it is to take care of your own family’s needs these days on an AGI of $15,000 to $75,000. Of course, most low-income taxpayers don’t itemize their deductions, so it’s hard to say how much they really give as a whole. But especially when you take into account that collection plate, I think the overall giving level of low-to-moderate income folks could average 3%.
Now go up to the $100,000-$200,000 adjusted gross income range. Yuppies, lawyers, doctors. Their average charitable deduction in 1994 was $3,420 — less than 3% on average.
Now go up to the $200,000-$500,000 range. Surgeons, law partners, big-time corporate VPs. They averaged $8,372 — still barely 3%.
Those in the $500,000-$1,000,000 range averaged $21,582. Still about 3%.
“The recent back and forth debate on giving by the wealthy may be forgetting one key factor. The number one reason people give is because the right person asked them for their support. That doesn’t mean everyone who is asked gives, but is a much clearer indication of success. If you don’t ask someone to give, how will they know the money is needed? And I don’t mean stuffing their mailbox with begging letters and grant proposals.
[Why not? Between reading the headlines and getting those appeals, how could anyone not know their money is needed? — A.T.]
“Each point your friend made along the way was based on his individual experience. However, readers of your daily epistles can not take his observations and infer any reality or trend to how the wealthy contribute. Take his point about the ‘rich’ preferring to give to United Way rather than the pediatric ICU. I am not challenging his experience. But in reality, it is not true.
“The wealthy — people whom fund-raisers call ‘individuals of high net worth’ — provided such great support to museums, hospitals, the arts and education, that United Way was feeling left out. They used to complain, ‘Why don’t the rich give to us?’ It was only ten years ago that United Way began appealing directly to wealthy donors. Before that, rich didn’t give much to United Way but NO ONE ASKED THEM TO GIVE TO UNITED WAY.
“Thanks to the leadership of a few key people in Nashville, Tennessee — most notably Dr. Tommy Frist — an entire national program sprang up. Called the Alexis De Tocqueville Society, it has helped local United Ways target appeals to and successfully raise funds (minimum gift of $10,000) from people who have the means to contribute at this level. It then spurred a million dollar roundtable that has attracted million-dollar-plus gifts from people like Walter Annenberg, Jenny Craig, Bill Gates and others. And then it developed other programs which gradually step people up to the $10,000 level by first getting individuals of means to give $1,000 or $5,000. It radically altered the landscape for United Way and got it out of the mindset of asking for just one hour’s pay per month from people who actually have the ability to give far above and beyond that level. Giving by wealthy individuals is now the fastest growing segment of gifts to United Way growing at 15 percent or more most years.
“Rather than lamenting why the rich give so little…people should examine those successful programs charities have put in place that are working to expand giving by this important segment of our society.”
[My question: has it expanded giving, or shifted the money from one good cause to another? The IRS statistics show that high-income people claim a pretty steady 3% or so of their adjusted gross income as a charitable deduction, which is about the same as not-high-income people. — A.T.]
“By marketing the individual and society benefits of a charity — any charity from the local United Way to the pediatric ICU — to this target group, charities can successfully help increase giving from a group of people most likely to have the means to give. It won’t happen overnight. But charity has to be more than a field of dreams. Just because the Boy Scouts, the Urban League or the Red Cross are there, it doesn’t mean people will just give. THE RIGHT PERSON STILL HAS TO ASK THEM TO GIVE. (BTW — I used to be the national public relations director for United Way.)” — Tony
Hats off, for sure, to the people who ask. It takes time and courage. It’s never fun asking for money — whether a friend or an imposing wealthy stranger. I always try to remember to thank the people who ask, even when I say no . . . but it’s easy to forget, because next to asking people for money, one of the next least pleasant things is being asked. (Well, I take that back. It’s a pleasure to be asked when the cause is compelling, the planned use of your money sounds efficient, and the amount sought is easy to part with, whether for you that means $5, $500 or $5,000. But one or more of those conditions is often not met, and then being asked is not so much fun.)
“Your generous friend provides great insight into the penny pinching of the wealthy. It reminded me of this anecdote from For God, Country and Coca-Cola:
Notorious for his petty frugality, [Ernest] Woodruff saved hotel soap and strapped bulky bonds under his clothes to avoid paying freight charges on them. Once, while a porter awaited a tip, Woodruff fished unproductively through his pockets. ‘I have a quarter here somewhere,’ he muttered. “Mr. Woodruff,” the porter said, “if you ever had one, you still got it.”
“I think that touches on a seventh reason the wealthy do not give. They associate money not only with purchasing power, but with the power to build up, to influence, and to destroy. Power of that voltage is never relinquished easily, if at all. My guess is that that’s why most of the great charitable foundations have been established after these titans are in their dotage; in their prime, they are too attached to their thunderbolts.” — Dave Davis
Quote of the Day
Follow a tip from a company's president and you will lose half your money. Get a tip from the chairman and you'll lose all of it.~Bennett Goodspeed (The Tao Jones Averages) quoting a canny Scot.
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