Phony Stats Squash My Charitable Impulse

The always-interesting Michelle Malkin posts some info showing that Red States are more generous in their charitable giving than Blue States.  In the words of one of my favorite free-marketeers, "Bah, humbug!"

This study compares mean (not median) Adjusted Gross Incomes to Charitable Deductions based on Federal tax return data sorted by state.

Several things are missing.  To compare states properly there should be adjustments for differences in cost of living, including state and local taxes.  There is also a hard-to-measure problem of windfall income - folks who have one high-income year (a book advance, a bonus at work, sale of stock, exercise of stock options) may normalize their charitable giving over subsequent years, not simply in the year their income ticked up.  (Now ask me about Charitable Trusts!)  If such transient income is more common in some states than others (likely!), this will also distort a direct comparison.

The median/mean problem can be sidestepped by looking at the raw data, which is broken down by income ranges.  Unsurprisingly, the mean income within an income range is relatively constant across states.  However, there are clear differences in Charitable Deductions, and the stingy states still look stingy, which takes us back to the cost of living question.  Thatsaid, Utah should take a bow - go, Mormons.

Also worth remembering - there are plenty of Democrats in Red States, and plenty of Republicans in Blue States - these charts don't really match the voters with the donors.

And keep in mind - this study was designed by some Massachusetts philanthropists with an eye to spurring donors in their region:

Strategically, and though we would never claim exclusive credit for this, we think it fair to point out that in the first four years after the first publication of the Catalogue and the Generosity Index, Massachusetts giving doubled—from $2 billion to $4 billion, the highest rate of increase in the nation; New England became the fastest- growing region in charitable giving. Massachusetts has ranked higher in the nation in each of the first four years since 1997 (2001 was disruptive everywhere) than it did in every year before 1997, and in 3 out of those 4 years Massachusetts' rank in the Generosity Index rose to an unprecedented 47th in the nation, from our accustomed slot of 50th in the years 1991-6.

MORE:  Barrons ran a national map based on a similar study two years ago

Comments

[Slartibartfast]

and in 3 out of those 4 years Massachusetts' rank in the Generosity Index rose to an unprecedented 47th in the nation, from our accustomed slot of 50th in the years 1991-6.

Yeah, but at least they don't get divorced much. Irrelevant, but it was never relevant in any other context, either, so I figured what the heck.

[Dacotti]

Remember though that the posting of this report was in response to a rant by a Northeasterner that the Blue states paid all the taxes that the Red states were mooching off of. Apply your error corrections to that data and you'll probably see a lot of leveling there too.

[Forbes]

Gee, couldn't we adjust income for our state cost of living, and then apply the income tax rate. That would make the income tax liability fairer, too.

[Attila]

To compare states properly there should be adjustments for differences in cost of living, including state and local taxes.

I don't know about this. Who chose the legislators who imposed the high taxes? Who stayed put while having their income sucked away to the state capital? Who talks about taxes as the price we pay for civilization? And then who takes a big tax deduction on their federal return for the high state taxes they pay?

I've always thought we should completely eliminate the federal deduction for state taxes so that people who want them or simply live in high-tax states (I used to live in New York and now I'm in Maryland) have to bear the burden of their own foolishness. I'm willing to bear it. So should others.

[Jim Glass]

Here's a red/blue rank ordering that makes it pretty clear to the eyeball:
http://massbackwards.blogspot.com/2004/11/give-til-it-hurts-or-not.html

"To compare states properly there should be adjustments for differences in cost of living, including state and local taxes. "

Cost of living pretty much washes out because the highest cost of living by state goes with the highest average income by state.

In fact, if anything, it makes the blue states even cheaper because they have the highest nominal incomes, and thus the highest tax brackets (both federal and state), and thus reap the most cash tax savings from income and estate tax deductions for gifts to charity -- and still they give less. Cheap bastards.

BTW, there's good data on this average state income, average tax rate in the state stuff at www.taxfoundation.org.

"There is also a hard-to-measure problem of windfall income - folks who have one high-income year (a book advance, a bonus at work, sale of stock, exercise of stock options) may normalize their charitable giving over subsequent years, not simply in the year their income ticked up. "

I'm not sure this is a problem. Windfall income would be spread out in the average income of both kinds of states. (I get my windfall this year, you get your's next year, etc., it averages out in the average).

Anyhow, to the extent there is big-money windfall income, if there actually is more of it in one kind of state than another, I'd guess the most'd be in the blue coastal states. Corzine got his windfall from Wall Street. Kevin Costner got his when he made Waterworld. If anything, that'd make the blue-staters look even cheaper.

"The median/mean problem..."

There are times when the mean is the better measure, and I'd say this is one of them.

"... there are plenty of Democrats in Red States, and plenty of Republicans in Blue States"

E.g., I'm here in the very bluest core of the blue heart of bluedom, voted red this year (or would have, if I hadn't been disenfranchised) and I'm a cheap bastard.

State culture trumps political affiliation.

"And keep in mind - this study was designed by some Massachusetts philanthropists with an eye to spurring donors in their region..."

Aye, now there's a rub that's hard to argue with.

[Thomas Nephew]

The generosity index may also be in part a *result* of red-staters getting more back in federal expenditures than they pay in federal taxes (ahem, map)-- not a snarky retort to it.

Red-staters have a lot of heavily subsidized stuff -- nice interstates, water projects, rural electrification, etc -- that their state couldn't have possibly paid for themselves in anywhere near the same time frame they got them. So the system works pretty well if you're sitting in Cheyenne or Boise or some burg 300 miles from either one -- leaving more disposable income for charities than you'd expect given the incomes observed.

[Thomas J. Jackson]

Do you think there is any connection with red state's high taxes, love of regulations, rent controls, etc and their inability to be charitable? Perhaps their cost of living would go down if they didn't foist socialist structures on their people. No wonder red states are declining in population while the blue states are growing.