The charitable sector in the United States is increasingly top-heavy, with a growing amount of philanthropic power held by a handful of very wealthy individuals and foundations — a trend that poses risks to the sector's effectiveness and independence, a report from the finds.
The report, (36 pages, PDF), found that the charitable sector is changing from a sector with broad-based support contributed by a wide range of donors to one dominated by a relative handful of individuals at the top of the income and wealth ladder. In 2017, for example, households with income of at least $200,000 accounted for 52 percent of all charitable deductions, compared with 30 percent in the early 2000s. Similarly, the percentage of charitable deductions from households with more than $1 million in income grew from 12 percent in 1995 to 30 percent in 2015. According to the report, the share of all households giving to charity fell from 66 percent in 2000 to 55 percent in 2014, while over the same period the number of low-dollar and mid-level donors — who traditionally have made up the vast majority of charities' supporters — fell by about 2 percent annually.
The study also found a significant increase in the number of mega-gifts awarded in recent years, with the threshold for such gifts jumping from $50 million in 2012 to $300 million in 2017. In 2012, gifts of at least $50 million totaled $1.2 billion and accounted for 0.5 percent of all individual giving in the U.S., while in 2017 gifts of at least $300 million totaled $4.1 billion and accounted for about 1.5 percent of individual giving. In addition, between 2005 and 2015, total assets held in private grantmaking foundations grew more than 60 percent, while contributions to donor-advised funds jumped 66 percent.
The implications for the sector and the health of democratic civil society, the report argues, include increased volatility and unpredictability in funding; a greater emphasis on major donor cultivation; a stronger funding bias toward major-donor-directed boutique organizations and projects (and all that means for mission creep and distortion); an increase in tax-avoidance and self-dealing; the warehousing of wealth in the face of urgent needs; and the increasing use of philanthropy to protect power and privilege. To address these risks, the report's authors call for an increase in the annual payout requirement for private foundations; reforming the rules governing DAFs to require distribution of donations within three years; banning gifts from private foundations to DAFs, and vice-versa; and establishing a universal charitable deduction to encourage giving by low- and middle-income givers.
"Charity is now becoming increasingly undemocratic, with organizations relying more and more on larger donations from smaller numbers of wealthy donors while receiving shrinking amounts of revenue from donors at lower- and middle-income levels," said Helen Flannery, associate fellow at the institute and a co-author of the report.
"There's nothing wrong with wealthy people giving bigger gifts to charitable causes that can improve society," said Josh Hoxie, director of the institute's Project on Opportunity and Taxation. "The problem is the rules regulating our charitable sector have become skewed toward prioritizing tax write-offs for the ultra-wealthy and not toward solving social problems."