Why Can’t I get Donations?

Everybody working in the arts and culture industry is feeling the pressure. State funding is declining and the funding agencies are promoting the argument that philanthropy must fill the gap left by the cutbacks. Arts organisations are all taking fund-raising courses, appointing funding executives, skilling up on varieties of CRM tools and soaking up the sayings of the new gurus – impact drives income, and you have to tell a compelling story about what you do, etc. etc.

I’m actually a big fan of all this, but there is a danger that we oversimplify the economic realities of philanthropy as well as its ethical implications.

The question is, can everybody build a sustainable artistic or cultural enterprise based on philanthropy and the answer is no – regardless of impact or compelling narrative. But that can be changed.

Income is not Wealth

A lot of the writing on philanthropy focuses on the strategies which can be used to get money (how to formulate the “ask”, how to deal with no, how to qualify a prospect etc.) but I want to draw your attention to the role of the giver and the context of the giving.

First, we need to understand, very very clearly, that income and wealth are two very different things and that philanthropy is the preserve of the wealthy.

For example, If I earn €35k a year I have no money for philanthropic purposes. If I earn €70K , or even a €100K a year its most likely I have no money as its now tied up in a higher mortgage, pension plans, savings, and probably school fees. The more I earn the more I tend to spend or invest (pensions etc) which means my liquidity is low. As a series of articles in The Atlantic magazine recently pointed out “The Fed asked respondents how they would pay for a $400 emergency. The answer: 47 percent of respondents said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all”. The situation is not much different in Ireland.  In a recent conversation with an Arts Festival Director on fundraising it was pointed out that the average income in her county was €18,000. Not a lot of disposable income there.

The lesson from all of this is that in order for me to engage in philanthropy I need to have wealth, preferably in liquid form.   Given that a very small percentage of people now own the vast amount of the wealth in many nations the task of the fundraiser has been greatly simplified – or so one would think.

Unfortunately, not so. Particularly in the Arts and Culture sector real philanthropy goes to those organisations, buildings and art forms that the philanthropist wants to attend, on the art that reflects and supports the self-image of the philanthropist. This is perfectly normal. The problems here are multiple. This kind of philanthropy is neither neutral or democratic: it supports only a particular world view and does not favour the emerging or the development approach.  There’s a reason why we don’t see Denis O’Brien in the New Theatre.

Arjo Klammer, the respected cultural economist talks about the three spheres of funding. The social, the government and the market. The vast majority of artists and cultural initiatives never get out of the social, relying on family and friends and exhausting Crowdfunding campaigns.  (I was asked recently why does Crowdfunding feel like begging from family and friends. Because essentially it is. If your family and friends are wealthy then you don’t feel bad about asking). Klamer’s point is that some artists get into the state funding sphere and from there progress to the philanthropic end of the market when they achieve a certain stature or organisational size. The rest, the majority, remain dependent on the social sphere.

The question then is how do we make it possible for the family and friends in the social circle to embrace philanthropy, assuming that most of them do not have wealth but may have income.

The answer of course is tax. Lets assume that I earn €35K. Lets further assume that I am allowed to donate €5K per annum in philanthropic donations. And then lets assume that if I do I get a 120% tax break.

It would be great if we could assume that the UK multiplier effect of 5:1 mentioned in the Warwick Report applied in Ireland, but unfortunately it probably doesn’t (something to do with the Marginal Propensity to Consume for the interested few). In fact I’ve found it difficult to establish a multiplier for Ireland, but I have been told it’s about 1.5:1.

So what would happen if there was a 120% tax break on arts donations for people on incomes of less than €70,000:

• I give €5,000
• I get €6,000 from revenue (so I’m €1,000 better off)
• The Arts Organisation or Artist gets €5,000 and spends it (so they’re better off)
• The arts organisation spend creates €7,500 (boosting the economy, so its better off)
• About 30% of this is taken in tax (PAYE and VAT)
• The Revenue gets €2,250 – i.e the cost to the revenue is reduced from €5,000 to €2750

You could make this progressive, the greater the income the lower the tax relief.  You could even allow for profit distribution subject to capital gains. There are lots of different permutations. Of course it all depends on the accuracy of the multiplier.

Beyond the Money

 But you do have to ask the question,  what would the wider social impact be?

• All those artists surviving in the “social sphere” could access money from their family and friends (their network as we like to call it now) with a clear conscience.
• Artists would no longer feel dependent on the Arts Council or local authorities for either money or valorisation.
• Donors would develop a keen interest in the work they were supporting, perhaps even going so far as to promote it to their friends and wider community
• An awful lot of artists would spend far less time in receipt of social welfare.
• The volume of creative activity would increase
• Philanthropy would no longer be the preserve of the wealthy, so the range of voices and perspectives would increase

Of course it’s not as simple as this – except it is. The real outcome is that you go a long way to democratising philanthropy, you make it easy for artists and arts organsiations to raise funding, you increase the disposable income in the system, stimulate the economy, create jobs and – yes build cultural engagement and develop audiences.

If we don’t do this then control of the production and – more importantly – the distribution of arts and cultural product is centralised and the wealthy will continue to support the kind of things the wealthy want to see. It’s very simple.