As we enter the critical final two weeks of the year’s most important month for non-profit institutions which rely upon donations,* now is a good time to reflect upon the fundamental freedoms that allow Americans to be the world’s most charitable people, and contemplate why those freedoms are increasingly threatened.
The ability to choose freely from the thousands of non-profit organizations seeking our support, to put one’s own personal, financial imprint on a cause, is one of those freedoms. Directly related to that freedom is the ability to create a grant-making institution and designate how the institution’s money will be donated. This same concept of “donor intent” applies when someone makes a donation aimed at a specific purpose, such as giving to a university to fund a certain educational project or endow an academic “chair.” Federal tax policy contemplates and supports these freedoms by broadly defining which institutions qualify for tax exempt status. As Randolph Foundation President Heather Higgins remarked in a WLF Conversations With paper this past summer:
Wisely, [the tax code] doesn’t try to classify some forms of charitable giving as more worthy than others, leaving the judgment of funding priorities to those who are deploying their own resources to make whatever difference they can.
Unfortunately, respect for donor intent and the freedoms which underly it is in decline. As an institution which advances and defends our free enterprise system, WLF has long decried the subversion of donor intent that we’ve seen from foundations created by such staunch believers in and beneficiaries of market capitalism as MacArthur, Ford, and Carnegie. The philanthropic remains of their riches have been hijacked by special interests to fund activist groups which assault free enterprise with litigation and public demonization campaigns.
The past several years have also seen an increase in efforts by non-profit activists and supportive politicians to dictate where donors give their money and how private foundations conduct their business. Motivated by the misguided belief that charity should be laser-focused on assisting “the underserved” or “marginalized communities” in ways narrow-minded activists deem acceptable, these groups have subtly (through reports and “best practices” pronouncements) and not-so-subtly (through demands for state legislation) sought greater government involvement in directing charitable activities. WLF’s Conversations With paper addresses these activist campaigns. They are also examined and critiqued in a recently released book, Generosity Unbound, by American Academy of Arts and Sciences fellow Claire Gaudiani. The Washington Examiner has been running excerpts from Ms. Gaudiani’s book this week, and it has also inspired an instructive debate at the Chronicle of Higher Education website between National Association of Scholars (NAS) President Peter Wood and the head of activist group Greenlining Institute, Orson Aguilar.
In his retort to Wood’s criticism of Greenlining Institute’s agenda, Mr. Aguilar once again repeated activists’ logically and legally lacking justification for greater government intrusion into private foundation decisions:
[B]ecause [philanthropic foundations] are exempt from federal (and usually state) income taxes, charitable foundations receive a massive subsidy from taxpayers.
Organizations supporting philanthropic freedom, including The Philanthropy Roundtable in a June 2009 Monograph and WLF in a September 2009 Working Paper, have refuted the notion that private philanthropy, and their charitable assets, are in fact public. NAS’s Wood dispensed with Mr. Aguilar’s argument rather effectively in a few sentences:
We don’t hold wealth at the sufferance of the government on the condition that we spend it as the state and federal bureaucracies stipulate. That’s one model of government, but so far, not ours. Private property is still private in the United States, even when it receives favorable tax treatment.
Most charitable donors don’t want anyone, especially government bureaucrats, telling them what to do with their money, nor do they want their intentions circumvented once donations reach their chosen charities. Activist and government attempts to more narrowly define what kind of charities are in “the public interest” will not only have the perverse effect of deterring donations to the widely diverse causes which may not directly serve the “underserved,” such as the arts, the environment, and even education, they may force philanthropists to cease their giving entirely.
These are all important things to think about over the next several weeks as many of us dip into our limited resources to make our yearly holiday season donations.
*For instance, a seven-year study by Network for Good found that a third of the online donations given to charities surveyed were made in December, and 22% of that online money is given in the final two days of December. Raymund Flandez, More Proof that December Is Critical to Charities’ Annual Giving, Chronicles of Philanthropy online.