Fears that the 1987 stock market crash will cause wealthy contributors to cut donations to nonprofit groups appear overblown, according to an economist who has been studying charitable giving by the rich.
Gabriel Rudney, a researcher at Yale University's Program on Nonprofit Organizations and a guest scholar at the Brookings Institution, said his studies show that from 1972 to 1975, which included the 1972-74 bear market, the wealthiest givers actually increased their total contributions by a third.
The 1972-74 period was, until now, "the most serious market decline since the 1929 crash."
"Giving of the wealthy, in the aggregate, did not drop off during the 1972-74 bear market," Rudney said.
On the contrary, according to Rudney, annual giving by the wealthy jumped by 33.8 percent from 1972 to 1975, at the same time that the stock market's composite price index was dropping by about 24 percent.
Rudney's study was based on five-year annual income and donation figures included in federal tax returns of individuals whose annual income averaged at least $100,000 during the period.
These people represented about 1 percent of the taxpaying population in any given year but, based on figures derived from a sample year, they made about 18 percent of all personal contributions to educational institutions, hospitals, cultural organizations and private and community foundations.
Rudney found that while some of these donors cut their contributions, others increased them substantially.
One reason for this pattern, he said, is that "many wealthy are substantial income gainers during a bear market." For example, he found that while about one-third of the wealthy had income losses of at least 30 percent, almost as many had income gains of at least 30 percent.
Some may quickly sell off stocks that rose sharply during the previous bull market and realize large capital gains before the market drops too much, then make contributions, he said. Alternatively, before it drops too much they may donate appreciated stock to nonprofit groups and realize tax advantages.
Moreover, he found that even some of those who lost income during the 1972-74 bear market increased their level of contributions. "Public concern that the wealthy, overall, will seriously cut their support of private institutions . . . is unwarranted," Rudney concluded.
Such conclusions run counter to fears expressed by some in the charitable community. A November survey by United Press International found that while large charitable foundations did not expect to cut donations immediately, if the market shows "a sustained downward course, a shrinkage in gifts is likely."