Charity Begins Far From Home: Why Americans Are More Generous Than Australians

15 May 2015

Australia ranks sixth in the Charities Aid Foundation’s world giving index, behind the US, Myanmar, Canada, Ireland and New Zealand. The index incorporates donations of money, helping strangers and volunteering time.

Bill Gross, the famous American bond king who became rich betting on interest rate shifts, revealed this week that he intended to give away his $US2 billion ($2.5 billion) fortune.

Soon after the verbose Gross declared the idea was “staggering, even to me”, Wall Street private equity boss Stephen Schwarzman​ of Blackstone Group revealed his latest donation; $US150 million to build a performing arts centre at Yale University.

America’s rich are showering cash on education, healthcare, scientific research, the environment, arts, religion, racial relations and third-world poverty.

The United States, the wealthiest and most capitalist economy in the world, is the most generous.

Enormous wealth built on finance and technology, generous tax deductions, fear of ruining their children and a smaller government safety net are undoubtedly catalysts to take up the “giving pledge” challenge issued by Bill Gates and Warren Buffett. Yet there is something else in the American psyche that makes philanthropy appear almost obligatory.

Billy Starr, the founder of the Massachusetts Pan-Mass Challenge bike-a-thon cancer fundraiser that is on track to raise a cumulative $US500 million in its 36th year, says people feel a “sense of ownership in the causes they support”.

“American psychology, as best I can read it, is that we were supposed to do something and step in to change some of the culture,” Starr says.


In comparison, Australia ranks sixth in the Charities Aid Foundation’s world giving index, behind the US, Myanmar, Canada, Ireland and New Zealand. The index incorporates donations of money, helping strangers and volunteering time.

Analysis of tax data by Koda Capital, a Sydney wealth management firm with a philanthropy service, shows $2.29 billion worth of donations were claimed in 2012-13, with an average donation claim of $504.

In the US, philanthropy has a proud history dating back to 1638, when deceased minister John Harvard bequeathed his library and half of his estate to an undergraduate school in Massachusetts that became known as Harvard College.

More recently, Facebook founder Mark Zuckerberg started channelling the company’s stock and his own cash to fund public education, while hedge-fund manager Kenneth Griffin donated $US150 million to his alma mater, Harvard University. They are not alone.

Buffett, 84, affirmed this month that he is progressively giving away 99 per cent of his estimated $US70 billion fortune, saying he wants to “leave his children enough to do anything, but not enough to do nothing”.

David Rubenstein​, co-founder of Washington-based private equity group The Carlyle Group, intends to donate most of his reputed $US3 billion wealth before he dies. He typically donates more than $US100 million a year to causes such as the John F. Kennedy Center for the Performing Arts, Columbia University’s Medical Center, the National Gallery of Art and the Thomas Jefferson Foundation.

“The federal government doesn’t have the money that it used to have, and therefore if we want to keep some of the great symbols … I do think people – all citizens, not just me – need to consider patriotic philanthropy,” Rubenstein said at a conference attended by AFR Weekend last year.


Lauren Shenfield​, principal at Philanthropy Advisors in New York, says many wealthy people have more money than they need, so they want to leave a legacy or “don’t want to leave so much to their children that it might get in the way of [them] leading happy or productive lives”.

She encourages wealthy people to give while they’re alive so “they can have fun and enjoy it”.

“A lot of people just leave money in their will and never experience helping other people,” she says.

Indisputably, the rich have been big beneficiaries of the US’s capitalist economy, financial architecture, education institutions, strong rule of law and low personal taxes, helping them to accumulate huge wealth.

More cynically, the favourable viewing business leaders receive from influential politicians, potentially meddling government regulators and the public cannot be dismissed as possible motivating factors.

Beyond pure altruism, the tax landscape in the US is also more favourable than Australia’s for philanthropy.

As well as the enticing tax-break carrot, the tax stick of estate and inheritance taxes lure the rich to become philanthropists while they are living, instead of incurring dreaded “death taxes”.

“Donor advice funds are a very tax-efficient way to give, because the donor gets a bigger tax break for appreciated securities and capital gains,” Shenfield says. “They save money and are able to give more to charity.”


Surprisingly, although the uber-rich win the public accolades, “Americans are generous right across the board”, says Penelope Burk, president of Cygnus Applied Research, a fundraising consulting firm.

“What the uber-wealthy give is proportionate to what people on average incomes give.”

Poor states Arkansas, Mississippi and Alabama donate more per capita as a share of income than wealthier states.

“People who are suffering themselves are more conscious of the difficulties that other people endure, particularly during the 2009 recession,” Burk says.

The international outperformance by the US is boosted by its 536 billionaires, according to Forbes, compared to 39 in Australia, the BRW Rich 200 calculates.

Locally, the late healthcare magnate Paul Ramsay bequeathed an estimated $3 billion to charity. Financier Graham Tuckwell and wife Louise donated $50 million to the Australian National University. The Packers, Pratts and iron ore miner Andrew Forrest have made head-turning contributions in the hundreds of millions.

“We believe that these gifts will provide an example to others, giving hope for the development of a culture of philanthropy in Australia,” write Chris Wilson and David Knowles of Koda Capital.

“Big gifts and public philanthropy are becoming commonplace, providing hope for the development of a culture of philanthropy.”



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