Charitable Giving…Let’s Level The Playing Field

LevelMarty Levine

July 27, 2022

From the moment I wake up until I shut down my iPad, ready to sleep, I am constantly asked to donate. At 6.30 a.m., my public radio station starts my day with a request for a gift. Throughout the rest of my day a steady stream of requests for money coming from organizations, all for the most part for worthy causes, many for various go-fund me efforts flood my mailboxes. I don’t think I am unique. The needs are there. The cost of doing charitable work is great and the mechanisms for reaching out to me are easily available.

Each cause reaching out to me asks me to understand the importance of its cause. I’m asked to recognize the worthiness of those asking for my help. When I give, at best I may be offered a thank you gift, a premium of marginal value. In return, all I expect is some confirmation, a thank you note, that the funds have been received that I can provide to the Internal Revenue Service if I claim a deduction for the money I have given. What I am not offered is power and influence. As a modest giver it is not my expectation that if I give, I will have much say in exactly what happens with my money. I expect that it will be spent responsibly, and that it will go to the cause I chose to support.

In all of this I am quite normal, quite like most donors.

But this is not the reality of the small number of very wealthy men and women who make up a growing dollar share of charitable and political giving. For decades, as all giving to charities has grown, the portion of the American population that makes a gift of any size has gotten smaller.

It is that small segment of mega-donors who has kept fueling the national philanthropic engine.

2 years ago, two-thirds of all households were charitable givers; by 2018 (the most recent data available) it had fallen to just half. Overall charitable giving increases because a cadre of very wealthy donors is able to make huge gifts. In the most recent edition of “Gilded Giving”, the Institute for Policy Studies’ annual review of American philanthropy, we can learn that “In 2011, Giving USA’s threshold for mega-gifts was just $30 million, and gifts of that size or larger amounted to $2.7 billion. By 2021, just 10 years later, the mega-gift threshold had jumped to $450 million, and gifts of that size or larger added up to nearly $14.9 billion.”

If these givers gave like you or I, we might just celebrate their generosity and be glad that worthy causes were benefitting. But they do not give like you or me. They too often give their funds in ways that undermine the very essence of giving.

My giving must pool with that of many others to actually have an impact and to make a difference. When I give, I am responsible for choosing who I believe will do the most good with my money, those who will meet I needs that I think are important. Once I make the gift, I trust that my choice was correct. If I am wrong, I may choose to find another place to support when next I wish to give some money away.

The organizations smaller donors support are actually those doing the work. They are helping people respond to a life challenge; they are providing programs and services; they are educating the community about issues and solutions. It is the recipient, not the donor, who decides how best to put these gifts to work, whether it is exactly how I would do the work or not.

Large givers give differently. Their recipients of choice are too often not operating charities, but places to park their money and retain control. “In early 2022, the Chronicle of Philanthropy published its annual list of the top 50 philanthropists in the U.S. Of the $25 billion in identifiable gifts that the group donated in 2021, 69 percent of it — more than $17 billion — went to private foundations. The second-largest chunk, more than $2.6 billion, went to donor-advised funds (DAFs). Both of these intermediary giving vehicles are favored by wealthy donors because of the significant tax advantages they offer…. Giving to private foundations has increased from 6 percent to 15 percent of all charitable giving since 1992. Giving to DAFs has increased from 4 percent to 15 percent of all charitable giving since 2007. Together, these charitable intermediaries now soak up 30 percent of all U.S. donations — more than quintupling their share of the charitable pie in less than thirty years…But funds may or may not flow from them to active charities in a timely way; there is no guarantee that they will fulfill the public interest.”

Giving to a foundation or to a DAF does not bestow a greater tax benefit than does making a gift to an operating charity. What is different is giving through those channels allows the wealthy donors to maintain control of their funds even though they have, supposedly, given them away. The wealthy man or woman who establishes a foundation determines who sits on that organization’s Board of Directors, where decisions are made about when and how the foundation will spend its resources. The Foundation can hire, using the charitable funds, the staff it needs to manage itself and decide how it wants to spend its funds. All of this is still controlled by those who gave the funds away as if it was still their money. DAFs are a bit different but still confer on that “donor” a great degree of control of when and how the money they have given away gets put to work serving society.

Whatever the mechanism of choice is, wealthy donors are able to reap significant tax benefits while retaining control of their assets. This retained control allows them to substitute their personal vision and beliefs for that of their community and the larger society. These donors are able to influence the culture of nonprofit work to fit their own perspective and to decide what issues and populations are most deserving and needing of their significant investments. They have recognized that their potential giving is large enough to give them the ability to control the very way that non-profit operating charities must do their work. This has allowed them to push the sector to emulate the ethos of modern business, to value efficiency and measurable results over mission and belief, and to accept that short-term results are more important than long-term impact. Their wealth, the potential of big gifts, allows them to substitute their expertise for that of those who are closer to the actual charitable work.

And they have not been bashful in using the influence of their wealth. This has led the authors of Gilded Giving to conclude that“ if we continue on our current trajectory, our charitable sector will be more and more dominated by large legacy foundations and donor-advised funds while working charities face greater fiscal austerity. An ever-greater share of charitable dollars will be diverted into wealth warehousing vehicles rather than going to nonprofits serving critical needs. Wealthy donors will increasingly be able to use their charitable giving to opt out of paying their fair share in taxes to support the public infrastructure we all rely on. And they will increasingly be able to deploy philanthropy to advance their narrow self-interests. “

The personal act of giving, an expression of kindness or ethics, is distorted into an instrument of power by the growth of a small class of ultrawealthy men and women. Charitable spending combined with political spending is available to only the mega-rich. We can argue whether Bill Gates, Charles Koch,  Mackenzie Scott, and the other mega-donors are doing good for the world as they and their peers make staggering donations. We can like the approach of one or the other mega philanthropist. But we should not miss the larger implication of a society that allows a few to amass enough wealth that they have uncontrolled power to shape to the world. The problem is not one individual being good or evil. Uncontrolled power feeds on itself, and it corrupts. It shapes the world for its own self-protection.

We cannot be blinded by a wealthy donor making a large gift to an organization that agrees with our values and goals. We cannot settle for adjusting the laws of charitable giving. We need to recognize this mega-philanthropy, even “good” mega-philanthropy, is but a symptom of a society where a small number of donors have unimaginable wealth and live in all ways differently from the rest of us.

And if that concerns you as it does me, we need to reform the rules of charitable giving., something most of our fellow citizens would like to see happen. “According to a new Ipsos poll, 81 percent of Americans do not believe that taxpayers should subsidize the wealthy to create perpetual private foundations. And the overwhelming majority also want private foundations and donor-advised funds to pay out funds to charity much faster than they currently do.”

And we might join me in supporting changes to our tax laws that make it harder to hoard wealth in amounts well beyond a level needed to live even an opulent lifestyle.