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The Cafe

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Will most charities

really suffer from

the new tax regime?

Jill Stephenson

What are we to make of the furore about tax-deductible charity contributions? I doubt that many of us who read this magazine will be inconvenienced by not being able to give more than £50,000 a year, or a quarter of our income if it exceeds that. It is not as if this provision prevents rich people from giving more to a charity; it simply means that they won’t get tax relief on it. If this is a disincentive to the super-rich, it says more about them than about George Osborne (who, come to think of it, is one of the super-rich).

     There are major philanthropists in Britain who have contributed much to the well-being of charities in the fields of health, education and the arts, among others. But one has rather had the impression that the rich in Britain do not contribute proportionately. I recall reading that those on modest incomes give a higher proportion of their income to charity than do the rich. It is true that the incentives are not as generous as they are in the United States. I don’t know whether it’s still the case, but I recall being invited to lunch in a New York restaurant in the 1980s by a colleague who insisted on paying – ‘I can claim it back from tax’, he said. On this occasion, then, I was the charity.
     In the US, major arts centres receive fabulous sums of money to enable them to stage spectacular performances. The Metropolitan Opera in New York advertises that a production is ‘the gift of Mrs Donald D Harrington’, or some other benefactor. The most amazing act of philanthropy is the Getty centre in Los Angeles. Remarkably for the US, there is no entrance fee. There is a complimentary little white train that takes visitors from the street up high to where the centre is perched. The architecture is pleasing and the premises are beautifully landscaped. The art collection is legendary. Yet all I spent money on when I was there was my lunch and some gifts from the shop – and taxis, it being otherwise inaccessible. No doubt Getty received a massive tax break for this. But as a gift to the public it is priceless.

It seems that the biggest losers in the new arrangements will be, amazingly, universities, 24% of whose income comes from benefactors. But how many of Britain’s universities benefit from the munificence of millionaires?

     I am left wondering what Mitt Romney has gifted to the nation to merit his 10% or 15% tax rate. President Obama pays rather more, and we are told that last year he and his wife gave $100,000 to charities. However, judging by the attitudes of many reasonably well-off Americans to the introduction of a ‘socialist’ health care system, one has to wonder how many of them give much away. Perhaps the tax breaks are enough of a sweetener to encourage them.
     In Britain, the Charities Aid Foundation arrangement is a pleasing one for the modest giver. Choosing one’s level of support and then signing the form to ensure that an extra 20% is provided as a tax rebate is rather satisfying. One can see the taxman tearing his hair over this, especially when the sums donated are large.
     It seems that the biggest losers in the new arrangements will be, amazingly, universities, 24% of whose income comes from benefactors. But how many of Britain’s universities benefit from the munificence of millionaires? Is it more than two? And we know which two – to those who have shall be given. It may be that a few other universities, such as my own or St Andrews, have had such a benefit. But in the philanthropy stakes, it is Oxford and Cambridge, the universities that have historically had the largest endowments of all, that have benefited disproportionately.
     The arts, too, benefit more than most charities from the gifts of the rich. But further down the pecking order, wildlife or other animal charities would suffer little under the new regime.

Jill Stephenson is former professor of modern German history at the University of Edinburgh