TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

A Member of the Law Professor Blogs Network

Friday, December 7, 2012

Freakonomics: This Christmas, Divide Your Giving Among Fewer Charities

FreakonomicsFreakonomics:  Charitable Giving: Why Fewer Is More:

As any 10-year-old can tell you, multiplication is commutative: 2 x $70 is the same as 70 x $2.

But not in charitable giving, it turns out. Making two donations of $70 is a good deal more valuable to charity than making 70 donations of $2.

The reason lies in the fixed transaction costs. Many charities (unavoidably) get charged a fee for each deposit into their bank account. So two large donations create only two dollops of that fee, whereas 70 smaller donations attract 70 dollops. ...

Research by the U.S. Center for Effective Philanthropy shows that these transaction costs are much higher if the foundation makes several small grants than if it makes a few large ones of the same total value:

Median time which charities spend applying & reporting on a grant of:

Amount raised per hour spent

No. hours work in raising & managing $100,000

$10,000

12 hours

$833 /hour

120 (three weeks)

$100,000

27 hours

$3,704 /hour

27   (less than four days)

So when you’re choosing charities to support this Christmas, divide your total giving between fewer charities, whatever the scale of your giving.

http://taxprof.typepad.com/taxprof_blog/2012/12/freakonomics-the-christmas-.html

Tax | Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341c4eab53ef017ee5fefcd5970d

Listed below are links to weblogs that reference Freakonomics: This Christmas, Divide Your Giving Among Fewer Charities:

Comments

That's very interesting, I didn't think about a Charity's bank account as being taxed in the same way as ordinary business accounts. I think there should be a special lowered tax rate on Charitable Bank accounts.

Posted by: Peter | Dec 7, 2012 7:22:43 AM

Why do we need individual charity at all anymore? Obama's transformed, redistributionist system will take care of it.

Posted by: MochaLite | Dec 7, 2012 5:51:10 PM

alternatively, give 100 $0.01 cent donations to a charity you don't like

Posted by: 4F | Dec 8, 2012 8:30:14 AM

It's a very easy year for my family.......every request is greeted the same way........"Oh, sorry.....if I am being forced to support those who refuse to do so theirselves, I am foreswearing any donations this, and all years to follow."
"Good luck!!"

Posted by: NJ Mike | Dec 8, 2012 9:56:51 AM

We have a budget item for our charitable giving. This year, we are examining our charities to determine whether they get any material support from the government. If they do, we redirect the donation to a different charity that does not rely on government support.

It's a small matter - we aren't rich even in Obama's lexicon - but accepting government money seems like a pretty good marker for left wing causes.

So don't stop giving. Just make sure your money goes to charities which aren't in bed with Obama.

Posted by: Punditius | Dec 8, 2012 10:49:42 AM

For Punditius, how do you define "material support from the government" and exactly do you determine whether a charity gets "material support from the government"? Is there a reliable up-to-date list on the Internet somewhere?

Posted by: Justin | Dec 8, 2012 12:30:26 PM

Ought to add the oft-published accounts of what percent of contributions reach the intended recipients and wht goes for overhead, in particular top officials' salaries.

Posted by: tom beebe st louis | Dec 8, 2012 6:52:24 PM

Since the election, we apply a simple metric: Orthodox Jewish/Zionist institutions and organizations only. They have a much smaller contributor base (we are a small minority of a small minority) and really don't have much of a part to play in the glorious leftist utopia anyway.

Posted by: werewife | Dec 8, 2012 7:32:01 PM