Government Spending May Have ‘Crowded Out’ Charitable Giving Since 1961: Report

The percentage of Canadians donating to charities fell by nearly 8 percentage points between 1961 and 2023, with a new report suggesting that government spending may have “crowded out” private donations to charitable organizations.

Government spending on social services grew slowly through the early 1960s, but “began to increase dramatically” in 1967, with spending increasing on a per capita basis and as a percentage of gross domestic product (GDP), the recent Fraser Institute report said.

“Social benefit spending” as a percentage of GDP roughly doubled between 1961 and 2025, going from 4.8 percent to more than 9 percent. Governments’ per-capita spending also rose from $1,149 to $7,374—an increase of more than 600 percent.

Conversely, private charitable giving declined over the period covered by the available data, suggesting that a “negative correlation between government and private giving” could exist, author Sandra Peart wrote in the report, titled “Whose Job Is It to Care for the Poor?”

The data indicated that 24.5 percent of Canadians made charitable contributions in 1961, but that fell by 7.7 percentage points to 16.8 percent in 2023, the report said.

“Note that this decline occurred despite more favourable tax treatment for charitable donations over time,” Peart said.

The report highlighted how questions about supporting the poor became more prominent during the late 1800s amid rapid economic change. In Canada, new charities emerged in Atlantic Canada, while the Roman Catholic Church in Quebec provided many charitable services. At the same time, economists increasingly advocated for governments to play a role in addressing poverty.

Peart identified two possible explanations for the “phenomenon of crowding out.”

One reason is that governments that expanded their coverage of social services paid for those expenses through taxation, reducing individuals’ discretionary income and prompting them to lower their charitable donations. Also, governments may have borrowed money, leading people to realize this affected their future income and decreased their discretionary spending to support charities, the report said.

Another reason is that individuals may be less motivated to support the poor if they know the government “has it covered” through actions such as subsidized housing and direct payments to those in need, the report argued.

“Because they feel less obliged to support those in need, they will direct their discretionary income to other purposes,” Peart said. “The question remains as to whether these two effects have significantly reduced the incentive for private individuals in Canada to give, and if so, by how much.”

The report highlighted how the federal government has made several changes to the tax treatment of charitable giving since 1960, while the number of people who claimed donations on their tax forms has also varied over the past 65 years.

“Even if a smaller percentage of Canadian taxpayers is giving to charitable organizations, the ones who still give could be donating more of their income. But they are not,” Peart wrote.

Data showed that in 1961, givers donated 1.6 percent of their disposable income to charities, but that fell to 0.69 percent in 1984, and fluctuated over the next 30 years. As of 2023, givers donated 0.8 percent of their disposable income.

“There is one final, speculative question: supposing increased government spending has crowded out individual charitable donations, does this matter?” Peart wrote.

“To answer this, one would need to verify whether the government is better equipped than private charities to provide services to those in need,” she said. “This raises all sorts of theoretical issues along the lines of public choice economics pioneered by James Buchanan, who warned that it was foolish to suppose a romantic notion of politics.”