Whose Job Is It to Care for the Poor? Public Support, Private Charity, and Crowding Out in Canada Since 1960

Whose Job Is It to Care for the Poor? Public Support, Private Charity, and Crowding Out in Canada Since 1960

• This study explores whether increased public spending has “crowded out” private donations to charitable organizations.
• Private charities emerged during industrialization to provide mutually beneficial services to individuals in need.
• In Canada, government social spending increased both on a per capita basis and as a percentage of GDP after 1961. The percentage of GDP allotted to social spending rose and fell from then until the late 1990s, but rose thereafter, with a spike during the COVID years. It has fallen and risen gradually since 2022.
• All in all, social benefit spending as a percentage of GDP has roughly doubled, from 4.8 percent of GDP in 1961, to well over 9 percent by 2025.
• Charitable giving in Canada fell over the same period, indicating that there could be a negative correlation between government and private giving.
• After 1990, the percentage of taxpayers who claim charitable contributions on their tax forms declined. In all, the percentage of Canadians claiming contributions has fallen by almost a third, from 24.5 percent in 1961 to 16.8 percent in 2023.
• The percentage of taxpayers’ disposable income allocated to charities declined from 2000 through 2023.
• Crowding out may occur when taxpayers view it as the government’s role to look after those who need charity and see the government as directing their tax dollars to charities, thereby negating the need for their own charitable acts. Or taxpayers may perceive government spending as a claim on their future tax payments.
• While not conclusive or showing causality, the data are consistent with the theory that government spending is crowding out private charitable donations.