New Report Exposes How Top-Heavy Philanthropy, like Bloomberg Gift, Imperils Independent Nonprofit Sector and Democracy

Michael Bloomberg's $1.8 billion gift to John Hopkins University, is an alarming example of the problem identified in a new report, Gilded Giving 2018: Top-Heavy Philanthropy and Its Risks to the Independent Sector, co-authored by Chuck Collins, Josh Hoxie and Helen Flannery of the Institute for Policy Studies.

"Billion dollar gifts like Bloomberg's, while generous and visionary, mask a very disturbing trend," said Chuck Collins. The report highlights how the charitable nonprofit sector is currently experiencing a transition from broad-based support from a wide range of donors to top-heavy philanthropy increasingly dominated by a small number of very wealthy individuals and foundations.

As charitable giving becomes more dominated by mega-donors, this perpetuates the extreme wealth inequality that is disrupting our democracy, philanthropy and the vibrant independent nonprofit sector that we depend on.

Key findings include:

• Charitable contributions from donors at the top of the income and wealth ladder have increased significantly over the past decade. In the early 2000s, households earning $200,000 or more made up only 30 percent of all charitable deductions. But by 2017, this group accounted for 52 percent. And the percent of charitable deductions from households making over one million dollars grew from 12 percent in 1995 to 30 percent in 2015.
• There has been a marked increase in mega-gifting. In 2012, the threshold for mega-gifts was $50 million or more; gifts of that size amounted to $1.2 billion and accounted for just one-half of one percent of all individual giving in the United States that year. In 2017, just five years later, the threshold for mega-gifts jumped to $300 million or more; gifts of that size totaled $4.1 billion and accounted for about one and a half percent of all individual giving that year.
• In the past two decades, the number of households that give to charity has declined significantly. From 2000 to 2014, the proportion of households giving to charity dropped from 66 percent to 55 percent.
• The number and size of private grant-making foundations and donor-advised funds have shown dramatic growth. The funds held in private foundations grew 62 percent between 2005 and 2015; the number of private foundations chartered in the United States grew 21 percent over that same period.

"Over the last three decades, private wealth in the United States has become concentrated in fewer and fewer hands. " said Chuck Collins, director of IPS's Program on Inequality and co-editor of Inequality.org. "We're now seeing this same trend in the charitable sector as a growing amount of philanthropic power is being held in fewer hands"

"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 for Policy Studies.

Growing inequity in charitable giving continues to hold risks not only for nonprofits themselves, but also for the nation. This has significant implications for the practice of fundraising, the role of the independent nonprofit sector, and the health of our larger civil society.

"This is truer now than ever," said Josh Hoxie, Director of the Project on Opportunity and Taxation at the Institute for Policy Studies."As ever-greater proportions of charitable dollars technically qualifying as tax-deductible donations are diverted into wealth-warehousing vehicles such as private foundations and donor-advised funds, and away from direct nonprofits serving immediate needs."

This report calls for an urgent reform of the philanthropic sector to encourage broader giving, protect the health of the independent sector, discourage the warehousing of wealth in private foundations and donor-advised funds, and increase accountability to protect the public interest and the integrity of our tax system.

Changes in the rules governing philanthropy should include:

• Increasing the minimum annual distribution payout for foundations.
• Excluding foundation overhead from the payout percentage.
• Linking the excise tax on foundations to payout distribution amounts.
• Reforming the rules governing donor-advised funds to require distribution of DAF donations within three years.
• Banning gifts from private foundations to DAFs and vice-versa.
• Setting a lifetime cap on tax-deductible charitable giving.
• Establishing a universal charitable deduction to encourage giving by low and middle-income givers.

Full report available at: inequality.org/gildedgiving2018/