Marty Levine
December 18, 2024
The Chronicles of Philanthropy has published its list of ten biggest philanthropic gifts of 2024. This is one end-of-year list I look forward to seeing. It tells a lot about both the state of wealth inequality in our nation and about how misguided and broken our philanthropic system is.
The list covers 11 donations because one donor, Reid Hastings and his wife Patty Quillin, could make two separate gifts of immense size. What is important is that just ten 10 donors are wealthy enough to donate more than $5.7 billion!
To put this in perspective, consider that the bottom 10% of the US population has negative wealth. That means more than 33 million people have no assets at all; for them making a charitable gift would require them to decide what other life necessity they will forgo in order to help someone else whose need is greater than theirs. For them, the choice would be to pass on rent, food, or maybe healthcare. That tells me a lot about how distorted our nation’s economy has become.
The bottom 50% of the economic ladder average just $51,000 in net worth. 110,000 of these “average people” would have to donate all of their wealth, their savings, any equity they have grown in their home, and their retirement savings to equal what this handful of donors were able to give away without impacting their quality of life or requiring them to sacrifice in the least.
How could we get even more out of balance than this?
The Chronicle’s list also illustrates how our Philanthropic rules have been perverted.
As a nation, we value charitable giving. We see it as an act of individual choice that is part of our democratic system. And keeping it strong by building a system which rewards giving is important to maintaining this unique national quality. Here’s how the Philanthropy Round Table framed this belief:
The charitable deduction protects our freedom to create and operate institutions that make up a civil society separate from government. Electing representatives is not our sole means of expressing ourselves and contributing to national success. As citizens of a free country, we also have the right to act directly in the public sphere. The many private organizations that act within our borders—educating, assisting individuals, influencing culture, addressing social needs—are the ultimate bedrock underlying our democratic system.
The individual deduction for donations to these civic organizations, and the income-tax exemption for charitable operations, are more than just tax rules. They form a vital legal boundary between the state and civil society. They are not subsidies for civil society, but rather fences that keep government from interfering in a sector that is vital to our national freedom.
This may be true in a reality that has all people able to meet their basic life needs without assistance and has a government that has built and funded the systems to ensure that this is true. But that is not the world that we live in.
Our national reality is one in which millions of men, women and children live in poverty. Millions who are unable to rent decent housing or ensure that food is on their tables or meet their need for medical services or ensure that their children can get a quality education. We live in a nation where this is true of millions of people who work full-time.
Claiming that we cannot afford the cost of building an effective social safety net, local, state and federal governments have not been willing to change our tax codes to ensure that we have the public revenue streams needed. However, in this existing system the reward for charitable giving, a series of tax benefits, remains.
Here’s where two other charts I saw recently tell us how this system leaves those at greatest risk in the lurch and dismisses the will of the people.
First, just a few weeks before the October 5th election The Pew Research Center released the results of a survey looking at the issues at the top of voters’ minds.
About the same time Gallup published results from their survey of voters about the key issues facing the nation today:
We see giving as a measure of individual freedom and we allow the mega-wealthy free rein we reward giving that has no reference to need or public will.
Reid Hastings and his wife along with Warren Buffet just moved their funds to a charitable organization (Donor Advised Fund or Foundation.) with no meaningful requirement that the funds be used for any other purpose. In neither case was the money given to an organization actually doing the work of charity. In neither case will it directly or immediately speak to any of the issues at the top of peoples’ minds nor will it reduce the nation’s poverty rate, bring housing prices down or solve the environmental challenge. They get the tax break because they gave “donations” to an organization that the IRS has qualified as a tax-exempt organization; this determination is dependent on having the money actually get spent for a charitable purpose right now. In these cases, these almost 2 billion dollars can remain unspent on the organization’s balance sheet forever and not have to impact the lives of one single American. And as I wrote earlier this month, they can still exercise full control of these funds. They are being rewarded for making what I would categorize as a donation in name only, DINO.
Three donors made very large gifts to make college more affordable, giving to Universities which already have very large endowments. A noble goal but does the public not have a right to decide whether rich organizations should spend their wealth before we reward them becoming even wealthier? Michael Bloomberg gave $1 billion to a school whose endowment already exceeded $13 billion. Shouldn’tthe public have a voice in whether this tax-advantaged giving should go to defray tuition for medical students or if the University can and should do this with the money it already has invested? But, under the rules of our current system, the answer is no. We are required to give Mr. Bloomberg his tax reward and allow John Hopkins to not draw down on its endowment and we are supposed to just smile and say thank you. Or should Columbia University, which has an endowment of more than $14 billion, be asked to fund the establishment of the institute that the Vagelos Family has agreed to underwrite? It is nice to think about Dartmouth College being able to give out more scholarships, but should we not have a say about this coming from their $8 billion endowment before we reward another large contribution?
This is what happened today. Wealth becomes more and more concentrated and democratic systems and norms are corrupted. Three charts tell this story, but I fear few are listening and fewer seem ready to press for action for the needed reforms. And that is, indeed, a sad story to end 2024 on.
