Canadian taxpayers do not realize that charitable foundations have accumulated over $80 Billion in assets, using taxpayer’s money via charitable tax credits. And once people are informed, they overwhelmingly feel our tax policies need to be changed, forcing more of these billions to help our struggling charities. And the COVID-19 crisis demands it, now.
Growing Charity Gap
For several years, Canada has been facing a growing ‘charity gap’. There is a financial gap between the services required to maintain civility in our communities (i.e. social services for those experiencing homelessness, hunger, abuse, and in support of the elderly, animal welfare, environmental health, medical research, etc.), and the necessary funding to meet the growing needs. And it is being exacerbated by COVID-19, with a negative impact on charity revenue, made worse by an increase in demand for greater charitable social services.
Governments cannot pay much more
We cannot simply expect our governments to fill in the expanding charity gap. Practically all levels of government have deficits and carry significant debt (which is increasing exponentially due to the COVID-19 crisis). They cannot responsibly raise taxes to spend more on the charity gap without negative consequences. Raising taxes chases away wealth, investors, business, and weakens the economy necessary to generate the tax base the government needs in the first place.
Charities and foundations exist as an extension of government
Instead of being solely responsible for providing all social services, our governments have outsourced part of their responsibility, by appointing charities and foundations to be their “agents”. These organizations have been allowed to exist, with preferential tax treatments, to help provide social services on behalf of governments. To help ensure their success, policies have been established to offer charity tax credits to donors to incent charitable giving to these organizations. In turn, these organizations are accountable to voters and taxpayers.
Foundations have accumulated over $80 Billion
The current policies regulating foundations are not working as well as they should. The most recent reported data indicates over $80 Billion of financial assets have been accumulated within foundations, more than doubling in the past 6 years. Their assets have been growing at about 10% a year for the past decade, well above inflation and the growth in our GDP. Clearly, foundations have chosen, on their own accord, to accumulate assets rather than disburse more money to charities.
A main reason why policies regulating foundations have not been made better appears to be that Canadians are unaware of what is happening with foundations thus allowing the status quo to continue.
John Hallward is a professional market research consultant, author, and founder/Chairman of GIV3 (a registered charity to help encourage more Canadians to be more giving, including being a host of GivingTuesday in Canada). He is the author of The Happiness Equation.
Cover photo via Pexels by Kuncheek