Earlier in the semester, we
often debated about whether it is more beneficial to donate our time or our
money. Most of us, as college students, supported donating our time because, at
this stage in our lives, it seems more practical. However, many stated that as
busier adults with a more reliable income they may lean towards donating money.
According to the Corporation
for National and Community Service, in 2012, only 20.6 percent of New York
residents volunteered their time, while 44.9 percent made monetary donations to
charities. Based on this information, it is clear that, of those New Yorkers
who choose to act philanthropically, most preferred donating money over time. The
gap between the two forms of donations seemed even more drastic when New York was
compared to other states. Out of the 50 states, New York ranked 50th
based on time spent volunteering, but 2nd (only behind California)
in charitable contributions. This difference was astounding to me!
After finding these
statistics I began to wonder why New Yorkers prefer donating money. Perhaps it
is because it is more convenient – writing a check takes significantly less time
than volunteering. This
idea holds true throughout the entire nation, though, so why does New York so strongly
prefer donating money?
While giving time has the
benefit of allowing volunteers to see
themselves making a difference, monetary donations have one major advantage:
the opportunity for a tax deduction. Despite the fact that $259.6 billion worth
of time was spent volunteering in the United States in 2012, not a minute of
that time translates into a tax break. In New York State, where overall taxes
are higher than any other state in the nation, the chance to receive a
deduction may offer enough of an incentive for residents to choose donating
money over volunteering. This could help explain the drastic difference between
time spent volunteering and monetary donations within New York.
Is this fair? Should the
government offer tax deductions for volunteering time as well? Admittedly, it
would make the tax deduction process much more difficult because it is significantly harder to quantify the value of time. However, this may encourage New Yorkers,
as well as residents of other states, to volunteer more often.
Perhaps the trend between high taxes in New York and choosing to make monetary donations is coincidental. Residents may not even be considering the chance for tax deductions when giving to charities - after all, most simply do it out of the goodness of their heart or because they have a strong belief in a cause. Suggesting New Yorkers make their philanthropic decisions based on the opportunity to lower their personal taxes means that there is a hint of selfishness in their philanthropy. While I believe it is best to give selflessly, it is understandable to seek benefits from donating since it is part of human nature to act according to one's best interest.
Do you think there is a
correlation between high taxes and choosing to donate money over time, or are the two unrelated? Would
you choose to donate money rather than time knowing that there is the incentive
of receiving a tax deduction? Should the government offer such deductions or
does that cause philanthropy to become a more selfish and less heart-felt act?
To find more information about state rankings based on taxes and volunteering visit:
http://www.volunteeringinamerica.gov/
http://www.usatoday.com/story/money/personalfinance/2013/03/02/state-local-tax-burden/1937757/
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ReplyDeleteI thought that the issue Emily raised here was very interesting, so I took a closer look at the data. I decided to make a scatterplot comparing state tax rate and how much of their annual income the median person in that state gave. The data for state tax rate came from the link Emily included in her original post (http://www.usatoday.com/story/money/personalfinance/2013/03/02/state-local-tax-burden/1937757/), and I got the state philanthropy numbers from philanthropy.com (http://philanthropy.com/article/Generosity-in-the-States/133707/). Here's a link to the scatterplot I made: http://s4.postimg.org/9fi87zuot/State_Graph.jpg
ReplyDeleteAfter creating the scatterplot, I added a trendline and displayed the r^2 value. For those of you not familiar with statistics, the r^2 value is a measure of correlation. It ranges from -1.0 to 1.0, with a value of -1.0 indicating a perfect negative correlation between the x and y variables, and a value of 1.0 indicating a perfect positive correlation between the x and y variables. A value of 0 indicates that there is no relationship between the x and y variables. The plot of state tax rate versus state philanthropy had an r^2 value of 0.0683, which is very low. Although we might expect states that giver larger tax breaks to give more money, a value this low means that we can't really infer any correlation between the two variables.
After discovering this, I started thinking about other factors that could influence philanthropy on a state-wide basis. Utah gives by far the largest percentage of their median income, at 10.6% (the next highest state, Mississippi, gives 7.2%). However, Utah's tax rate is 9.3%, the 23rd lowest in the nation (basically right in the middle). As we all know, Utah has a large Mormon population. Mormons are required to give 10% of their income to the Church, which heavily impacts Utah's philanthropy number. Another example of outside factors influencing a state's philanthropy can be seen in New Hampshire. New Hampshire citizens are known for their self-sufficiency and having an independent nature. For instance, they are the only state that doesn't have a mandatory seat belt law. There are almost definitely other factors in play, but New Hampshire was the least-philanthropic state, at least monetarily, in 2012, with residents giving only 2.5% of their annual income.
Obviously, these data only discuss monetary philanthropy. I'd be interested to see what conclusions could be drawn from a comparison of state tax rate and median number of hours spent volunteering.
The questions raised by this post are very thought-provoking. When first reading this, I was surprised to see such a disparity between New York's ranking in regards to its monetary donations and hours spent volunteering and I was even more surprised upon seeing the scatter plot Jesse had created, showing that there was virtually no correlation between state tax levels and monetary donations (as I tend to believe in peoples' ultimate goal of self-interest, in this case via the incentive of tax deductions) Jesse's graph did an excellent job calculating the relationship between tax levels and monetary donations but of course, there is another set of data to be compared to the state tax levels: the percent of the states' population that volunteers.
ReplyDeleteI decided to use Jesse as an example and calculated the correlation between the other set of data as well: state tax burdens vs hours volunteered. When dealing with numerical data or statistics, the graphical approach is often the most convenient mode of viewing the information in an organized manner as well as finding trends or relationships between two data sets. Here's the link to the graph I made (Props to Jesse for making his. Entering all of that data took me forever!) http://tinyurl.com/mafabox
Although my graph does not have the exact linear regression value, it is plain to see that the graph is very scattered, showing little relationship between the two variables. Through this, one can say with relative confidence that state tax burdens seem to play little to no role in determining how much a states' residents participate in philanthropic endeavors monetarily or through volunteering.
Then what is the cause of all of this variation from state to state? Jesse brought up a valid reason by mentioning the Mormon religion as the reason Utah is so philanthropic. His mentioning of the self-sufficient nature of most New Hampshire residents also provided some sort of reason. Based on the maps and information available on the site Emily provided, I did notice that, in general, the percent of the states' population that volunteers is higher in the north than it is in the south. This could be the result of a variety of different factors, such as differing societal norms or varying values of "community" in the two regions. Any number of factors could have caused this difference in volunteering participation but at face value, it seems that there are far too many variables to pinpoint one direct cause of the variations seem from state to state. This could be another comparison to try to figure out. I'd be interested to see if there is any tangible reason for the difference seen between the north and south.
I recently realized that I got a little mixed up in my definition of r^2. The definition I gave is actually the definition of the statistical measure r. r^2, on the other hand, is always positive, and describes the proportion of change of the dependent variable we can assume is caused by change in the independent variable. For my post, the proportion is still very low, and my conclusion is more or less the same, I just wanted to fix my mistake.
ReplyDeleteWhen thinking about New York State. One has to realize that most of the occupants live in New York City or the New York City area. This is really where you get most of the people and thus most of the data. If you look at it relative to New York City it seems obvious that New Yorkers would want to spend rather than give time. I may be using stereotypes of New Yorkers, but on this it seems to be true. The stereotype is that New Yorkers are very busy with no free time and thus would be less likely to give time. Also New York City includes many of the countries ultra rich individuals. It would seem that these individuals would be the ones to give the most money, because of both tax breaks and more selfless reasons. So because of this combination of New York Citiers making up most of the population of this state it would make this data make sense.
ReplyDeleteTherefore this data actually make a great deal of sense. It would be greatly interesting to see the contribution percentages in the rest of the state relative to the city. Note this does not assume that there is nothing to do philanthropically wise in the city, just that the average NYCer is very busy and would not have time for philanthropic actions, yet would have the money to give a size able part away
Jesse and Kyle, you both did a fantastic job taking this topic to the next level. By analyzing the data using scatter plots and finding the correlation coefficient, it seems pretty obvious that the level of taxes and the amount of money/time donated are not closely related. I am actually relieved to see this conclusion because it allows me to believe that individuals choose to donate money out of the goodness of their heart, rather than because they have the incentive of a tax break.
ReplyDeleteJesse, Kyle and Itai all commented about other factors that may play into the differences between donating time and money. Itai, I had not considered how the stereotypical New York City lifestyle could affect a residents style of philanthropic action, but it was a very interesting idea. On the Corporation for National and Community Service website, I found data about how much time is spent volunteering in urban, suburban and rural areas of New York. The data shows that, in cities (not specifically New York City, but different cities scattered throughout NY State), only 14.3 precent of residents volunteer, while 25.7 percent and 25.6 percent of residents volunteer in suburban and rural areas, respectively. New York City is home to many people, but its population makes up only about 43 percent of New York State residents, according to the US Census. While this 43 percent may prefer donating money instead of time because of their lifestyle, this assumption is based solely on a stereotype and, therefore, is not very conclusive. As Kyle pointed out, we can speculate about factors that may influence individuals' decisions, but it is impossible to show a direct cause for the variation.
Although I am proud to be a resident of a state that donates a lot of money to charity, I am ashamed that New Yorkers spend so little time (in comparison to other states) volunteering. After realizing New York ranked 50th based on time spent volunteering, the competitive side of me wants to round up my friends and donate my time in order to try to improve our standing!