Thanksgiving and charity, after all, both represent the American mythology of individual contributions combining for shared gains. The idealized Thanksgiving potluck meal meshes seamlessly with the notion of charitable giving as a universal civic practice. The slogan for the Community Chest fundraising campaigns in the mid-20th century exemplified this American collectivism: “Everybody gives, everybody benefits.”
Today, though, American giving looks less like a diverse potluck and more like a lavishly catered meal with a tight guest list. The principle of universal participation has given way to “megadonor” billionaires, several of whom have started to tout such philanthropic accomplishments as a defense of their wealth, particularly in the face of aggressive recent taxation proposals. Total giving decreased last year, with individual donations declining by 3.4 percent. After the 2017 tax cuts, which raised the individual standard deduction to $12,000 — removing some incentives for charitable donations for filers whose deductions don’t hit that threshold — the share of taxpayers who took the charitable deduction went from 24 percent to 8.5 percent. While people are still giving even without the tax deduction, such a drop shows a new and sharp exclusion of many people’s gifts from “official” participation in the charitable sector. The ramifications are ongoing: Blackbaud reports a further decline of 1.3 percent in 2019 gifts, compared with this time last year.
The decline of non-elite giving isn’t entirely new. Since 2000, low-dollar and mid-level donors have gone down by about 2 percent each year. These givers have traditionally made up the bulk of solicitation lists, but as real wages have stagnated and cost of living has increased, many have less discretionary funds to give to the causes dear to them. The ultrarich, however, have plenty, and they’re increasingly using their charitable giving as a political cudgel.
Hedge fund billionaire Leon Cooperman’s public opposition to a 2 percent wealth tax proposed by Sen. Elizabeth Warren (D-Mass.) began with an open letter that cited Cooperman’s lifetime of giving as evidence that the wealthy are already deeply committed to public welfare. The ensuing exchanges between Cooperman and Warren culminated in Cooperman claiming to have given away more in a year than Warren has “in her whole . . . lifetime.” Bill Gates expressed a more nuanced perspective on taxation at the New York Times DealBook Conference but, nevertheless, concluded that entrepreneurs should be able to accumulate billions in personal wealth, albeit with the hope that they would give much of it away. Their comments echo Andrew Carnegie’s “gospel of wealth,” which stated that “in the hands of the few, [wealth] can be a much more potent force for the elevation of our race than if it had been distributed in small sums to the people themselves.”
But the Community Chest principle has an unfortunate corollary: When fewer people give — even the very wealthiest people, giving extraordinary sums — the pool of beneficiaries shrinks. Nonprofits must compete for funds from the same concentration of high-net-worth individuals. Their only path to financial stability is with major gifts from high-net-worth individuals. Brian Gallagher, chief executive of United Way Worldwide, told the Chronicle of Philanthropy that economic conditions are “forcing us and all nonprofits to continue to narrow our targeting.”
While the decline in gifts is partially attributable to changes in the tax code, the problem is more insidious: No matter how much billionaires cite their giving as evidence that their wealth creates social benefit, a concentrated donor class means an increasingly small circle of nonprofits who receive their largesse. Out of more than 1.5 million nonprofits, just the top 100 organizations, household names such as Harvard, Stanford and Memorial Sloane Kettering, received 11 percent of all charitable gifts last year. Meanwhile, the nonprofits that strengthen the average American’s quality of life — the community theater, local food bank or interfaith youth program — struggle to get by with a hollowed-out base of support. Even if billionaires are giving to less glamorous causes such as malaria prevention, the fact is only a limited number of organizations can get the attention and approval of such a small circle of people. The most acute example of this trend is in Silicon Valley, where “The Giving Code,” an influential 2016 study, showed that even in a region with both massively growing wealth and increased giving, local organizations are struggling to survive: “very little of [Silicon Valley philanthropy] is actually making its way to local community-based organizations providing important services and trying to address complex issues like homelessness, affordable housing, workforce development, or education reform.” Nationwide, in 2018, only small nonprofits (raising less than $1 million annually) saw a decline in their fundraising returns. The breadth of recipients matters: Declining support for local nonprofits perpetuates a loss of civic engagement and a more neighborly model of charitable support.
When concentrated resources mean fewer beneficiaries, giving itself appears less and less beneficial or even relevant to the lives of average citizens. This trend combines unfavorably with scandals such as the Sackler family’s opioid-funded museum wings and Jeffrey Epstein’s warm relationship with MIT Media Lab after making major gifts. If philanthropy is no longer a real sustaining force in people’s lives, it looks like elite self-dealing and indulgence — hardly something worth preserving fortunes over or worthy of the generosity of many people.
Philanthropy needs to be more egalitarian if it is to retain its legitimacy. As with potlucks, a broad base of contributions hedges against disaster, protects us from the capriciousness of our presumptive hosts and leaves us with enough to go around, no matter what. Wealth inequality is beginning to hurt nonprofits’ bottom lines while undermining their ability to improve people’s lives. In times of dependency on the benevolence of a few, we might think an aggressive claim on their wealth will jeopardize fundraising totals. Far from destroying philanthropy, enabling more people to rejoin the donor class may be the only way to protect it.