Technical Notes for 2003 Generosity Index (2001 Data)

The Generosity Index™ (GI) was conceived in 1997 as a concise way to summarize Massachusetts' and New England's greatest problem in philanthropy: that we have the nation's largest gap between our ranks in income and our ranks in charitable giving. The Generosity Index, with its "catchy" name, publicizes that fact and provides a way to monitor progress against the problem. We arrive at it by ranking each state's Average Adjusted Gross Income (AAGI) and Average Itemized Charitable Contribution (AICD or AICC), then subtracting the second rank from the first to get a single plus or minus number for each state indicating the favorable or unfavorable gap separating the ranks, and then ranking those numbers. Thus:

AAGI rank - AICD rank = Gap; Rank of Gap = Generosity Index

Example: MA in 1996^*:

3rd - 43rd = -40 Gap; Rank of Gap = 50th

^*The numbers are always two years old when published by the IRS, so these numbers from 1996 would have been published in 1998.

The words "Generosity Index" refer to the system and methodology of comparatively ranking the relation of every state's ranks in itemized charitable giving and in income, based on the comprehensive data of personal income tax returns. It has long been generally agreed that philanthropic generosity is not just how much one gives, but how much one gives in relation to how much one has-the so-called "widow's mite" phenomenon. As we have said from the outset, the Generosity Index is a "crude but telling" indicator; it is not scientific (e.g., economics, sociology) but it is educational, and specifically for donor education. It tells people roughly where they stand in comparison with their peers in other communities, in the relation between their respective ranks in income and in charitable giving. By doing so it raises the level of public discussions of charitable giving, in ways that are strategically useful.

Definitions of Variables:

1. Average Adjusted Gross Income (AAGI): The average adjusted gross income of all taxpayers for a particular state

2. Having Rank: a ranking of the Average Adjusted Gross Income

3. Percent of Returns with Itemized Charitable Deductions (ICDs): the percentage of taxpayers itemizing charitable deductions (call them "donors" for conciseness). This is the aggregate data from the Internal Revenue Service on taxpayers who itemize and take a charitable deduction for their contributions. This information however, covers less than 30 percent of all US taxpayers, as over 70 percent take a standard deduction and do not itemize. Although the proportion of itemizing taxpayers is relatively small, their charitable deductions do represent about 60 percent of the total estimated charitable contributions in the United States (The Urban Institute, 2001)

4. Avg. Itemized Charitable Contribution: the average level of donations for a state

5. Giving Rank: a ranking of the average donations

6. Ranks Relation: Having Rank minus the Giving Rank

7. Generosity Index: The index is created by comparing the rank of each state's average adjusted gross income (AAGI) to the rank of each state's average itemized charitable deductions (AICD). The arithmetical differences between these two rankings are then themselves ranked, resulting in the Generosity Index rank.