The accelerating concentration of philanthropic power in the hands of the affluent puts nonprofits at risk and can be checked only by significant tax-law changes, argues the latest in a series of reports and critiques focused on big philanthropy.
Nearly a third of itemized charitable contributions in 2015 came from households earning more than $1 million annually — up from just 12 percent in 1995, according to the new report. At the same time, the share of giving by average Americans has been declining for most of the 21st century, sapping the strength of national nonprofits that rely on small donations and don’t attract support from the affluent.
This report on “top heavy” philanthropy is the second from the Institute for Policy Studies, a left-leaning think tank. It contends that many of the trends identified in its first study, from 2016, are intensifying and mean charities may increasingly shape their work to accommodate the wishes of a few big donors.
The report also suggests that more giving may be tied to specific projects of interest to individual donors and starve charities of funds needed to do work that benefits society as a whole. “This is particularly concerning at a time when our social safety net is being gradually dismantled and charities are already struggling to provide services that would in the past have been provided by governmental agencies,” it notes.
Changes to the Tax System
To counter the growing influence of wealthy donors, the report proposes a raft of tax-system changes. “There’s nothing wrong with wealthy people giving bigger gifts to charitable causes that can improve society,” said Josh Hoxie, one of the report’s authors, in a statement. “The problem is the rules regulating our charitable sector have become skewed towards prioritizing tax write-offs for the ultrawealthy and not towards solving social problems.”
The report urges adoption of a universal charitable deduction, which, it says, will give low- and middle-income families more incentive to give. It also offers several proposals that reduce the tax incentives for the superwealthy to give. These include a $1 billion lifetime cap on tax deductions for charitable giving.
The report also targets what it calls the “warehousing” of charitable donations. It advocates increasing the rate at which private foundations are required to disburse assets, introducing a payout rate for donor-advised accounts, and limiting the life spans of both foundations and donor-advised funds.
Wealth Disparities
The report joins other recent analyses pointing to a divide in the charity world that mirrors the country’s increasing wealth disparities. The Chronicle’s November study of the 100 nonprofits that raised the most in cash and stock from private sources in 2017 found that groups that attract support from the wealthy thrived in the decade after the recession while “blue collar” organizations that rely on average Americans struggled.
Stanford scholar Rob Reich and journalist Anand Giridharadas and both published books this fall arguing that the tax system leads to inequities in giving. In Just Giving, Reich says there’s a bias baked into the tax system that richly rewards big gifts while offering few incentives for small donations.
In an interview with the Chronicle upon the release of his book Winners Take All, Giridharadas said “predatory” major philanthropists have fought to protect a tax system “set up to ensure that when progress rained on America, the very fortunate would harvest most of the rainwater.”
Conservative scholar James Piereson, head of the William E. Simon Foundation and a fellow at the Manhattan Institute, challenges these analyses. He argues that claims of a crisis in charity giving are overblown and used to bolster a push for the tax-code to address inequity.
“They are really worried about inequality of income and distribution of wealth,” he says. “And they’re trying to attack it through regulation of philanthropy.”
The report itself, he says, advocates reasonably for increased payout rates and limited life spans for grant makers. But recommendations like the proposed lifetime cap on charitable deductions make no sense.
“They seem to think that the wealthy should give less,” he says. “What kind of idea is that? Why do we want the wealthy to give less money to charity?”
