In Search of True Public Arts Support - Wiley Online Library

In Search of True Public Arts Support ARTHUR C. BROOKS

Most of the debate over government arts support focuses on direct subsidies to nonprofit arts organizations. In this article, however, I show that a much larger amount of public sector money comes from indirect aid, in the form of tax revenues forgone on tax-deductible contributions by individuals. Specifically, every dollar in direct federal arts funding is accompanied by about $14 in indirect aid. Analysis of the 1996 General Social Survey shows that private givers and supporters of direct government aid fit different demographic profiles, meaning that direct and indirect funding owe to distinct constituencies. These findings lead to a number of implications for nonprofit and public arts managers. It is sometime proper for the state to encourage and protect dishonorable but useful professions, without those who exercise them being more highly considered for that. Jean-Jacques Rousseau1

INTRODUCTION Controversy over government support of the arts is not new. As the above quotation suggests, RousseauFin one of his more restrained passages from this textFdescribes arts support as a regrettable necessity: necessary to support culture and heritage, regrettable for reasons having to do with issues of ‘‘character’’: ‘‘y I see in general that the estate of the actor is one of license and bad morals; that the men are given to disorder; that the women lead a scandalous lifey’’ This issue has been particularly visible in American cultural policy debates over the past 15 years. Scandals have centered on projects funded by the National Endowment for the Arts (NEA) deemed obscene, blasphemous, overtly partisan, or simply devoid of aesthetic merit. A prime example is Andres Serrano’s infamous photo (partially Arthur C. Brooks is Associate Professor of Public Administration and Director of the Nonprofit Studies Program in the Alan K. Campbell Public Affairs Institute, Maxwell School of Citizenship and Public Affairs, Syracuse University. He can be reached at [email protected]. 1. Jean-Jacques Rousseau, ‘‘Letter to M. D’Alembert on the Theater,’’ in Politics and the Arts, ed. Allan Bloom (Ithaca, NY: Cornell University Press, 1993).

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commissioned by the NEA) Piss Christ in 1988: a crucifix immersed in the artist’s urine.2 North Carolina Senator Jesse Helms probably summarized the view of many Americans when he said, in response to Serrano and related scandals, ‘‘Americans for the most part are moral, decent people and they have a right not to be denigrated, offended, or mocked with their own tax dollars.’’3 Such controversies tend to draw a bright line between art that is publicly funded and that which is privately funded, where each receives a different level of public scrutiny. However, I argue in this article that this line is based on a general misunderstanding surrounding the government’s true role in the financing of the arts in the United States. This misunderstanding involves the source and magnitude of government money: while most discussions of arts funding focus on direct subsidies to artists and arts organizations, the greater part of public sector funding is indirect, in the form of tax revenues foregone on tax-deductible private contributions to nonprofit arts organizations. Some authors maintain that direct and indirect funding are fundamentally different for constitutional reasons.4 From an economic perspective, however, they are clearly comparable: one subsidy collects and disposes of tax revenues; the other simply does not collect them in the first place.5 While this distinction is clear to many academics, it is frequently obscure to practitioners, and is the subject of this article. The rest of this article is made up of three sections. I begin with an estimation of indirect government arts subsidies, in comparison with direct aid. Finding a large discrepancy between the two, I then argue that the people responsible for government arts subsidies actually represent two different groups: those that support direct aid politically, and those that induce indirect aid vis-a`-vis their private donations. Finally, I discuss what the differences between direct and indirect aidFas well as the supporters of eachFmean for the nonprofit and public management of cultural industries. Direct versus Indirect Government Arts Support Direct support. Direct arts subsidies in the United States first became a public sector venture on a national scale in the early years of the New Deal. In 1933–1934, the Public Works Art Project (PWAP) employed 3,750 artists at daily wages at a total cost of $1.3 2. C.S. Vance, ‘‘The War on Culture,’’ in Culture Wars: Documents from Recent Controversies, ed. R. Bolton (New York. New Press, 1992). 3. Luke Hetherman, ‘‘The National Endowment for the Arts: Essential for Cultural Growth, Democracy and Creative Expression in America’’ (1999); available from: http://www.burbank.com/arts/ nea.htm; accessed December 2001. 4. Edward A. Zelinsky, ‘‘Are Tax ‘Benefits’ Constitutionally Equivalent to Direct Expenditures?’’ Harvard Law Review 112, no. 2 (1998): 379–433. 5. This basic point has been made by other authors in the past. See, for example, John G. Simon, ‘‘The Tax Treatment of Nonprofit Organizations: A Review of Federal and State Policies,’’ in The Nonprofit Sector: A Research Handbook, ed. Walter W. Powell, vol. 12 (New Haven, CT: Yale University Press, 1987), 67–98; and J. Mark Davidson Schuster, ‘‘Issues in Supporting the Arts through Tax Incentives,’’ Journal of Arts Management and Law 16, no. 4 (1987): 31–50.

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million ($16.3 million in 1999 dollars). The artworks created were used to adorn public buildings, and content was tightly controlled.6 This program was replaced by public art projects run through the Treasury Department until 1943. In addition, several projects began in 1935 under the auspices of the Works Progress Administration (WPA), distributing $5 million ($59.5 million in 1999 dollars) before being phased out in a cloud of controversy (over possible Communist influences) in the early 1940s. From the end of the Second World War until 1962, federal arts subsidies were ad hoc. Individual legislation provided government funds for specific temporary projects, such as the International Cultural Exchange program from 1954–1956 that sent American artists overseas, or the building of the National Cultural Center in Washington, DC, in 1958.7 This began to change with the Kennedy administration, however. In 1962, President Kennedy took the first steps toward institutionalizing arts policy at the federal level with the appointment of a Special Consultant to the President for the Arts. In 1963, he established the Federal Advisory Council on the Arts by Executive Order. President Lyndon Johnson continued this trend, and in the 1964 presidential campaign announced his intention to establish a National Endowment for the Humanities. Legislation that followed in the early part of 1965 led to the National Foundation on the Arts and the Humanities Act, which created the National Endowment for the Arts. The NEA received a first-year allocation of $2.9 million ($15.4 million in 2000 dollars). This budget quickly swelled, and in spite of well-publicized controversies at the agency over the past 15 years, appropriations have remained consistently far above their original level (even after correcting for inflation). In addition, the early NEA budgets spawned the creation of many arts councils at the state and local level. Figure 1 illustrates trends in direct federal, state, and local arts funding over the past 30 years, in constant dollars. In 1998, the total level of direct government arts funding, at all levels, was about $623 million.8 Indirect support. Private philanthropy to the arts has a much longer history in the United States than public subsidies. Before the Civil War, the fine arts were commercially 6. Lawrence D. Mankin, ‘‘Federal Arts Patronage in the New Deal,’’ in America’s Commitment to Culture, ed. Kevin V. Mulcahy and Margaret Jane Wyszomirski (Boulder, CO: Westview Press, 1995), 77–94. 7. Milton C. Cummings, ‘‘To Change a Nation’s Cultural Policy: The Kennedy Administration and the Arts in the United States, 1961–63,’’ in America’s Commitment to Culture, ed. Kevin V. Mulcahy and Margaret Jane Wyszomirski (Boulder, CO: Westview Press, 1995), 95–120. 8. Federal funding levels are available from the NEA at http://www.arts.endow.gov; accessed 2 March 2004. State levels come from NASAA (1999, Table 1). Local levels come from the United States Urban Arts Federation (1998, p. 4). This discussion, and that which follows, uses NEA support as being synonymous with U.S. federal dollars to the arts. This is technically not comprehensive, because some funding occurs directly to institutions, such as the Kennedy Center, the Smithsonian Institution, the National Gallery of Art, and the Commission of Fine Arts. However, the NEA comprises the largest share of federal dollars targeted to the arts in general, not just to the administration of a particular organization. National Endowment for the Arts, ‘‘International Data on Government Spending on the Arts,’’ NEA Research Note 74 (Washington, DC: National Endowment for the Arts, 2000); National Assembly of State Arts Agencies, State Arts Agency Public Funding Sourcebook (Washington, DC: NASA, 1999); United States Urban Arts Federation, United States Urban Arts Federation Report Fiscal Year 1998 (Washington, DC: Americans for the Arts, 1998).

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FIGURE 1 Direct Government Funding to the Arts in the United States, 1970–1998

Millions of 1998 dollars

800

600

400

NEA appropriations

State appropriations

200 Local funding

1970 1

1974

1978

1982

1986

1990

1994

1998

Year Source: Kevin McCarthy, Arthut Brooks, Julia Lowell, and Laura Zakaras, The Performing Arts in a New Era (Santa Monica, CA: RAND, 2001). Note: Local funding data are unavailable before 1990.

supported and commingled with popular works and curiosities. Paintings were generally sold by lottery and displayed in museums such as Barnum’s;9 musical ensembles such as the famed Germania Musical SocietyFan ensemble of immigrant musicians from the elite German conservatoriesFperformed everything from the most austere of classics to, on at least one occasion, ‘‘A Grand Concert of Music by Mr. A. Mutie, an African monkey, and several Chinese dogs.’’10 The rise of the nonprofit organizational form in the early 20th century allowed patrons to exert greater control over the arts through private, tax-deductible donations.11 Many authors see the fine artsFfunded through private givingFas a ‘‘club good’’: one from which patrons derive mutual benefits from shared personal characteristics or the actual exclusion of nonmembers.12 The nonprofit organizational form allowed patrons to shield the high arts, as a club good, from commercial popularization. They did so through the

9. B. Pettit and P. DiMaggio, ‘‘Public Sentiment towards the Arts: A Critical Reanalysis of 13 Opinion Surveys,’’ Center for Arts and Cultural Policy Studies Working Paper 5–3/98 (1998). 10. H. Earle Johnson, ‘‘The Germania Musical Society,’’ Musical Quarterly 39, no. 1 (1953): 75–93. 11. Paul DiMaggio, ‘‘Cultural Entrepreneurship in Nineteenth Century Boston, Part I: The Creation of an Organizational Base for High Culture in America,’’ Media, Culture and Society 4, no. 4 (1982): 33–50. 12. Roland Kushner and Arthur E. King, ‘‘Performing Arts as a Club Good: Evidence from a Nonprofit Organization,’’ Journal of Cultural Economics 18, no. 1 (1994): 15–28; and R. Cornes and T. Sandler, ‘‘Easy Riders, Joint Production, and Public Goods,’’ Economic Journal 94, no. 375 (1984): 580–598.


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FIGURE 2 Private Giving to the Arts, 1990–2000 12

Billions of dollars

11 10 9 8 7 1990

1992

1994

1996 Year

1998

2000

Source: AAFRC (various years).

establishment of corporations which, in exchange for tax-exempt status (which could keep them financially viable, even without Mr. Mutie and his African monkey), were under the control of a carefully chosen board of trustees.13 The financing of the arts today is overwhelmingly private nonprofit. According to the U.S. Census of Service Industries, for example, 87 percent of classical music ensembles are registered nonprofits.14 The average American nonprofit performing arts firm earns 59 percent of its income through fees and receives 36 percent in donations, while just 5 percent comes directly from the government. Philanthropic support of the arts is common throughout the population: 11.8 million American households made private contributions to the arts in 1999.15 This giving amounted to a little more than $11 billion, outweighing total direct government subsidies to the arts by almost $16 to $1.16 This seems to be a relatively stable ratio over time. Since 1990, it has fluctuated between $13 to $1 and $20 to $1. Figure 2 illustrates the trends in private arts philanthropy over the past decade. Private giving to the arts induces indirect government support. To understand this, assume that a contributor to a charity faces a marginal income tax rate for all levels of 13. Peter D. Hall, ‘‘A Historical Overview of the Private Nonprofit Sector,’’ in The Nonprofit Sector: A Research Handbook, ed. Walter W. Powell (New Haven, CT: Yale University Press, 1987), 341–361. 14. U.S. Department of Commerce, Bureau of the Census, U.S. Census of Service Industries (Washington, DC: U.S. GPO, 1997). 15. Independent Sector, The New Nonprofit Almanac IN BRIEF: Facts and Figures on the Independent Sector (Washington, DC: Independent Sector, 2001); available from: http://www.IndependentSector.org; accessed 2 March 2004. 16. AAFRC, Giving USA (Indianapolis, IN: Center on Philanthropy, 2000); available from: http:// www.aafrc.org; accessed 2 March 2004.

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government of t (where 0oto1), and itemizes deductions for charitable contributions on his or her income tax returns. Each dollar in income donated results in a deduction of t. Hence, if the taxpayer donates D in income to the charity, federal, state, and local governments indirectly pay tD of this donation. The precise level of indirect government subsidies to the arts is X GIt ¼ yi tit Dit ; ½1 i

where tit is agent i’s marginal tax rate at time t; Dit is agent i’s donations to the arts; and yi is an indicator function, where yi 5 1 if i itemizes his or her tax deductions, and yi 5 1 if not. To estimate GIt directly requires sampling the population of arts donors, as well as their marginal tax rates. A more common and simplerFalthough impreciseFestimate of Equation 1 is G~It ¼ tt Dt ; ½2 where tt is the average tax rate across the population a time t, and Dt is the total level of donations to the arts. Imprecision here comes from three main sources. First, this assumes that all donors deduct their donations from their taxes, thus overstating the true level of indirect subsidies. Second, it assumes that all donors have the same tax rate, which, if we believe that donors tend to come disproportionately from the upper income brackets, will bias the estimate downward. Finally, it assumes that the average tax rate is an adequate proxy for the marginal tax rate of donors, although in reality, the marginal rate is surely higher than the average rate; this should also create a downward bias in Equation 2. Despite its imprecision, Equation 2 allows us a rough cut at estimating Equation 1. Given the U.S. Congressional Budget Office’s estimates of average federal tax rates from 1990 to 2000, as well as the estimates of total giving from the data in Figure 2, Figure 3 shows that indirect government subsidies to the arts grew fairly steadily (in real dollars) from $1.14 billion in 1990 to $1.64 billion in 2000. Given the NEA appropriations over this period, this suggests that the ratio of indirect to direct federal arts subsidies ranged from $7 to $1 (in 1990) to $17 to $1 (in 2000).17 To improve the precision of Equation 2, we might estimate Equation 1 as " # X jt ; tjt D ½3 yj GÎ ¼ Dt t

j

where the population is arranged by income percentiles j. tjt is the average tax rate for jt is the proportion of gifts to the arts given by percentile j; yj is the percentile j; D proportion of percentile j that itemize deductions; and Dt is total giving to the arts. Table 1 summarizes data from the 1996 General Social Survey and the 1997 Survey of Income to estimate Equation 3. 17. This is considerably higher than estimates in the literature from the 1980s (for example, Schuster 1987, or Alan Feld, Michael O’Hare, and J. Mark Davidson Schuster, Patrons Despite Themselves: Taxpayers and Arts Policy (New York: NYU Press, 1983). The reason for this is twofold. First, the ratio rose over the 1990s as marginal tax rates increased (lowering the price of giving). Second, earlier estimates tended to look at all levels of government fundingFnot just federal.


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FIGURE 3 Indirect Government Subsidies to the Arts, 1990–2000 1.70

Billions of dollars

1.60 1.50 1.40 1.30 1.20 1.10 1.00 1990

1992

1 1994 1996 Year

1998 199

2000

TABLE 1 Giving to the Arts, by Income Percentile Income Decile 10 20 30 40 50 60 70 80 90 100 a

Average Effective Federal Income Tax Ratea

Percentage that Itemizes Deductionsa

Percentage of Total Gifts to the Artsb

0% 0% 0% 0.5% 5.3% 8.4% 9.8% 10.9% 12.3% 21.5%

1.2% 2.3% 5.6% 9.0% 13.6% 22.6% 35.2% 50.7% 70.2% 88.7%

4.0% 5.6% 0.4% 1.2% 2.7% 2.1% 6.7% 7.2% 12.1% 57.9%

Source: Survey of Income, 1997. Source: General Social Survey, 1996.

b

Effective income tax rates for the bottom 33 income percentiles are mostly negative, primarily due to the Earned Income Tax Credit. Because negative taxes are not meaningful in the current context, I have made the lowest effective tax rate zero for calculating Equation 3. Note that my use of average effective tax rates instead of (imagined) marginal rates means that the indirect subsidies will still be estimated on the low side. Table 1 shows that the top income percentiles account for the vast majority of gifts to the arts: the top 10 percent account for nearly 60 percent of gifts; this climbs to 80 percent of

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gifts by the top 20 percent of earners. The lowest percentiles account for a surprisingly high amount of giving to the arts as well: the bottom 20 percent of earners gives nearly 10 percent of all gifts. We might suppose that this largely represents taxpayers with high wealth but low income. Calculating subsidies as in Equation 3, the federal government granted indirect aid to the arts of $1.42 billion in 1999. Comparing this with the NEA appropriation in the same year, the ratio of indirect to direct funding was about $14 to $1, which is consistent with the cruder estimate from Equation 2. Combining direct and indirect subsidies, these figures indicate that true federal arts support in 1999 was $5.55 per American, about $5.19 of which was indirect. These figures compromise much received wisdom regarding the U.S. government’s purported miserliness toward the arts. Low federal arts spending has been fiber in the diet of arts lobbying groups for a generation. For example, the American Arts Alliance (a nonprofit arts advocacy organization) complains that ‘‘Cultural funding is less than one one-hundredth of one percent [.01%] of the Federal Government’s multi-billion dollar budget, and a mere 36 cents per capita.’’18 This assertion is simply incorrect.19 Note that none of this explicitly compares the United States to other countries in arts funding. Even counting indirect support, the United States spends less on the arts per capita than any of the Western European countries.20 This is a more legitimate claim for arts advocacy groups.

Supporters of Indirect versus Direct Support Given the substantial difference between direct and indirect government arts subsidies, cultural policy and arts management would do well to understand the supporters of each. When arts advocacy groups lobby Congress to increase the budget of the NEA, are they having any effect on the fundsFprivate donationsFthat overwhelmingly comprise government’s true level of aid? Does lobbying for greater direct aid represent misdirected effort? We can investigate these questions using the data from the 1996 General Social Survey (GSS). The GSS is a survey that has been administered through the National Opinion Research Center (NORC) most years since 1972.21 It asks a sample of about 2,000 respondents different subsets of about 4,000 questions on a wide variety of topics. In 1996, GSS contained questions on giving patterns as well as attitudes toward government arts subsidies. It included the following questions:

18. American Arts Alliance (2002); available from: http://www.americanartsalliance.org; accessed April 2002. 19. In addition to ignoring indirect subsidies to the arts, it also overlooks arts funding at other levels of government which, as Figure 1 makes clear, are considerably higher than federal spending. 20. J. Mark Davidson Schuster, Supporting the Arts: An International Comparative Study (Washington, DC: National Endowment for the Arts, 1985). 21. James Allan Davis, Tom W. Smith, and Peter V. Marsden, General Social Surveys, 1972–1998: Cumulative Code Book (Chicago: National Opinion Research Center, 1999).


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TABLE 2 General Social Survey Data Used to Predict Support for Direct and Indirect Government Aid to the Arts Variable Givesa Governmenta Income Education Malea Whitea Age Liberala Christiana a

Mean (Standard Deviation)

Definition Respondent gives privately to the arts Respondent supports greater government direct aid to the arts than at present Respondent’s personal annual income (1,000s of 1996 dollars) Respondent’s years of formal education Respondent is male Respondent is white Respondent’s age Respondent classifies self as a political ‘‘liberal’’ Respondent classifies self as a Christian

0.0958 0.1575 26.9286 (22.0766) 13.3648 (2.9294) 0.4425 0.8089 44.7771 (16.8677) 0.1320 0.8103

Dummy variable.

Do you support more government spending on the arts and culture than at present?22 Did you contribute to any arts and culture organizations in the past year?23 The sub sample that was asked these questions, as well as a battery of demographics, was about 800. Analysis of these data helps to uncover differences in the demographic profile of arts donors versus those who advocate more direct government aid to the arts. I do so by comparing the effects of different respondent characteristics on the probability of an affirmative response to each of the questions above, in the context of binary choice regression models. The data for these models are summarized in Table 2. The 22. The exact wording of this question was, ‘‘Please indicate whether you would like to see more or less government spending [on arts and culture]. Remember that if you say ‘much more,’ it might require a tax increase to pay for it.’’ Respondents were given five categories to choose from, ranging from ‘‘spend much more’’ to ‘‘spend much less.’’ The variable constructed here, SUPPORT, represents a response of either ‘‘spend much more’’ or ‘‘spend more.’’ 23. The exact wording of this question was, ‘‘[The following list contains] examples of many different fields in which people and families contribute money or other property for charitable purposes. I mean making a voluntary contribution and not with the intention of making a profit or obtaining goods and/or services for yourself. In which, if any, of the fields listed on this card have you and the members of your family or household contributed some money or other property in 1995?’’ The list contained an entry for ‘‘Arts, culture, and humanities.’’

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TABLE 3 Logit Regressions on Arts Support Data Dependent Variable

Independent Variable Constant Income Education Male White Age Liberal Christian

Gives

Government

Coefficient (Standard Error)

Coefficient (Standard Error)

6.2591*** (0.9812) 0.017*** (0.0054) 0.203*** (0.0512) 0.5083** (0.2644) 0.8125** (0.4202) 0.0113 (0.0109) 0.1356 (0.3718) 0.4678 (0.2914)

2.4979*** (0.7292) 0.0002 (0.0053) 0.1163*** (0.0426) 0.0348 (0.2092) 0.6568*** (0.2364) 0.0019 (0.0092) 0.9239*** (0.2437) 0.7179*** (0.227)

808

808

N *

Coefficient is significant at the .01 level. Coefficient is significant at the .05 level. *** Coefficient is significant at the .10 level. **

independent variables are chosen consistent with the existing empirical literature on private giving24 and public opinion toward arts funding.25 Of the 808 respondents who answered all of the questions in Table 2, about 10 percent gave privately to the arts, and about 15 percent felt the government should be aiding the arts (directly) at higher levels. Thirteen percent were self-described ‘‘liberals,’’ 44 percent were men, 81 percent were white, and 81 percent classified themselves as Christians. The average education level was about a year and a half past high school, the average age was about 45, and the average income level (in 1996 dollars) was about $27,000. The empirical model is yi ¼ a þ Xi b þ ei ;

½4

where yi 5 1 if the respondent answers affirmatively to the support questions above (and 0 otherwise); Xi is the vector of demographics; and ei is a random disturbance. I estimate Equation 4 using a logit specification. The results of these estimations are summarized in Table 3. Note that this model is not meant to capture any causal link between 24. Richard Steinberg, ‘‘Taxes and Giving: New Findings,’’ Voluntas 1, no. 2 (1990): 61–79; and Charles T. Clotfelter and Eugene Steuerle, ‘‘Charitable Contributions,’’ in How Taxes Affect Economic Behavior, ed. Henry Aaron and Joseph Pechman (Washington, DC: Brookings Institution, 1987), 403–437. 25. Arthur C. Brooks, ‘‘Who Opposes Government Arts Funding?’’ Public Choice 108, no. 3–4 (2001): 355–367.


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demographics and arts support; rather, my aim is simply to build demographic portraits of supporters. The results in Table 3 are broadly consistent with the literature cited earlier on arts philanthropy and arts public opinion. Several coefficients are notable: income positively associates with giving, but not support for direct government aid. Education is directly correlated with both kinds of support. Men tend to give less than women. Whites give more than nonwhites, but are less likely than nonwhites to support direct aid. Political beliefs do not associate with giving, but being a liberal strongly pushes up support for government aid. Self-identification as a Christian has the opposite effect. These results can be made more concrete through some simple sensitivity analyses. The expected probability that a respondent with one particular demographic characteristic will answer affirmatively to either support question can be defined as p^k ¼ ½1 þ expfðy þ bk Þg1 ; ½5 where p^k is the expected probability of a ‘‘yes’’ response; bk is the regression coefficient on characteristic k, and hence its marginal impact on p^k ; and y is the log-odds that y 5 1 for the ‘‘average’’ respondent. y can be estimated as y ¼ lnð p=1 pÞ; ½6 where p is the population proportion for which y 5 1. Table 2 shows that for private giving, p ¼ 0:096; for support for direct government aid, p ¼ 0:158. Then, the effect on the expected probability owing to a marginal increase in variable k (0 to 1 in the case of the dummy variables; a one-unit increase for the continuous variables) is defined as ½7 p^k p: I set the marginal change from all statistically insignificant variables to zero. The results of this sensitivity analysis are summarized in Figure 4. The largest effects on support are associated with race and political ideology. Specifically, white respondents are ten points more likely to give privately than average, but seven points less likely to support direct government aid than average. And while declaring oneself a political ‘‘liberal’’ is not associated with differences in private giving, it explodes the probability of supporting direct aid to 16 points over the average. Selfdescribed Christians do not give differentially from the population average, but are seven points less likely than average to support direct aid. Age has no discernible association with either type of support, while men are four points less likely to give than the population as a whole. An extra year of education pushes up the probability of each kind of support by about two points. An extra $1,000 in personal income is not associated with support for direct aid, but pushes up the probability of private giving by one-tenth of 1 percent. It is clear that supporters of direct aid are a somewhat different group than those who support indirect aid (through their giving). People responsible for indirect aid are also partially responsible for direct aid, of course, in that they pay taxes. However, direct aid owes its political support to the group roughly described in Figure 4. As such, we can

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FIGURE 4 Changes in Expected Probabilities of Supporting Direct Government Aid versus Giving Privately to the Arts Supports more government arts funding

Change in expected probability from a marginal change in variable

0.20 +.16 Gives privately to the arts

0.15

+.10 0.10

0.05 +.001 0.00

0

+.02

0

0

+.02

0 0

0

−.04

−0.05 .05

−.07

−.07 CHRISTIAN

LIBERAL

AGE

WHITE

MALE

EDUCATION

INCOME

−0.10

Variable

identify two fairly distinct constituencies for government arts support, which overlap relatively little. A general portrait of indirect aid supporters that emerges from the data is of upper-income, educated white women. A portrait of direct aid supporters is generally that of nonwhite, educated, self-described liberals.

Summary and Implications for Nonprofit and Public Managers While most of the debate on government arts support focuses on direct aid, this article shows that a much greater portion comes from indirect aid in the form of tax revenues forgone. Specifically, every dollar in direct federal arts funding is accompanied by about $14 in indirect aid. Data analysis shows that private givers and supporters of direct government aid fit different demographic profiles, meaning that direct and indirect funding owe to distinct constituencies. These results lead to several implications for nonprofit and public arts management. First, nonprofit arts managers can view indirect subsidies as being, in essence, matching grants, in which the government pledges to subsidize donors’ gifts at their individual marginal tax rates.26 This may be an effective means to leverage higher donations: the government makes a donation ‘‘worth more’’ to both donors and 26. Arthur C. Brooks, ‘‘The Nonprofit Sector’s Stealthy Subsidy,’’ The Nonprofit Times 15 April 2003, 15.


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recipients than its (tax-deducted) dollar value, and this is particularly true for donors with high tax rates. Arts managers might also introduce the concept of indirect subsidies in explicitly political terms, arguing that donors are in the driver’s seat regarding the government’s commitment to their cause. Imagine an arts fund-raising pitch that says, ‘‘Do you believe the government should spend more on the arts? Then make a donation, and force the government to give.’’ Second, the demographic profiles in the last section suggest that the best current targets for fund-raising are high-income, high-education white women. However, this also suggests that the inverse profileFmen, minorities, low-income, and low-educationF may represent an undercultivated group. Third, it seems clear that arts groups should be targeting giving and givers, instead of government officials, in their efforts to increase government funding of the arts. If the true aim is to increase public sector resources as much as possible for the production and consumption of arts activities, then doing so through the stimulation of philanthropy Fand hence indirect subsidiesFappears to be more of a winning fund-raising strategy than shaking the tree of direct aid.27 These implications suggest future work on this subject that might build on the analysis here in a number of ways. For example, I have focused primarily on federal government aid, and less on state and local funding. Authors might seek to build more comprehensive measures of total direct and indirect government support than I have here. In addition, it might be useful to investigate the extent to which direct public arts funding might itself be deployed in the generation of private giving, and the practical ramifications of this for arts nonprofits.

NOTES For their helpful comments, I am grateful to Kevin McCarthy, Jeff Straussman, and an anonymous referee. Alison Louie provided valuable assistance on this research.

27. What we really care about is the yield on the marginal development dollar, not the average dollar. However, given that average (federal) dollars are relatively constant, while average private gifts to the arts are generally growing, we may speculate that the highest marginal returns are at the very least moving in the direction of private giving. Arthur C. Brooks, ‘‘Do Government Subsidies to Nonprofits Crowd Out Donations or Donors?’’ Public Finance Review 31, no. 2 (2003): 166–179.

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