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WASHINGTON – In advance of the 10th anniversary of the Giving Pledge, founded by Bill Gates and Warren Buffett, a new report from the Institute for Policy Studies (IPS) documents a troubling trend of small donor declines with a parallel rise in wealthy mega-donors within the nation’s philanthropic sector.

The report, “Gilded Giving 2020: How Wealth Inequality Distorts Philanthropy and Imperils Democracy,” finds that this top-heavy philanthropy poses considerable risks to the independence of the nonprofit sector, the integrity of the tax system, and to democracy itself. It also suggests that the 2017 tax cut and the COVID-19 pandemic will worsen this drift toward inequality in philanthropy. The report can be found here.

“Philanthropy should not become an extension of private wealth and power for the richest 0.1 percent,” said Chuck Collins, Co-author of report and Director of the Program on Inequality and the Common Good at IPS. “Congress needs to update the rules governing philanthropy to prevent abuses to the tax code and protect our democracy and nonprofit sector.”

“The Giving Pledgers set out in 2010 to give away half their wealth and instead their assets have doubled,” said Collins, citing one of the report’s findings.  “By giving $1.7 billion directly to 116 charities, MacKenzie Scott (Bezos) has modeled what Giving Pledge billionaires should be doing with their wealth. They should give it directly to working nonprofit charities and not to their own perpetual family foundations or donor-advised funds.”

While overall giving to charity has grown over the last several decades, the report says that trend masks the growing inequality in charitable giving.  Findings include:

The Giving Pledge, founded by Bill Gates and Warren Buffett, is a case study of top-heavy philanthropy. On August 4, 2010, 40 billionaires pledged to give away at least half their wealth before their death. But the growth in billionaire wealth has largely outstripped their capacity to give in a timely way. The “Gilded Giving 2020” report includes a preview of data from a forthcoming larger analysis about the impact of the Giving Pledge. Among these findings:

The preliminary analysis in the report reveals two troubling concerns related to the Giving Pledge: 

The “Gilded Giving 2020” report also documents how ever-greater proportions of charitable dollars are being diverted into wealth-warehousing vehicles such as private foundations and donor-advised funds, rather than going to active nonprofits serving immediate needs.

“The original proposition was in exchange for a tax reduction, the donor gives up dominion over their money and it flows to a charitable purpose,” said Helen Flannery, report co-author. “Why should taxpayers subsidize perpetual private foundations that give away the mandated minimum each year and chew up millions in overhead? Why should donors get substantial tax reductions for giving to donor-advised funds (DAF) with no mandate that funds flow to working charities?”

Report authors point to the Conrad Hilton Foundation as an example of a perpetual foundation that is an inefficient use of taxpayer subsidies.  The Hilton Foundation has $2.8 billion in assets and spent $51 million in overhead to give away $101 million in grants in 2018.  Over $18 million went to staff compensation and fees to six family-member trustees, who received $35,000 a year to serve on the board.

The report points out that risks to the public include: 

Risks to charitable independent sector organizations include: 

The report recommends a number of solutions.

Immediate Action: Congress must implement an Emergency Charity Stimulus, a three-year emergency mandate to require private foundations to double their payout from 5 percent to 10 percent; establish a temporary 10 percent payout requirement for donor-advised funds that have no mandate. This would move an estimated $200 billion off the sidelines and into front-line working charities without increasing taxes or adding to the deficit.

Charity Reform Agenda: Rules governing the giving sector have not been meaningfully modified since 1969, a period of relative equality in the U.S.  The modernization reforms should aim to:

To further these larger goals, the rules governing philanthropy should be overhauled to maximize the public good in these ways:

Proposed reforms include:

The final report Gilded Giving 2020 can be found here.

Citations

[1] REPORT: Gilded Giving 2020: How Wealth Inequality Distorts Philanthropy and Imperils Democracy ➤ https://inequality.org/gilded-giving-2020[2] Letter - Emergency Charity Stimulus ➤ http://charitystimulus.org/[3] REPORT: Gilded Giving 2020: How Wealth Inequality Distorts Philanthropy and Imperils Democracy ➤ https://inequality.org/gilded-giving-2020