The IPS Charitable Giving Reform Initiative aims to overhaul the rules governing philanthropy to boost the flow of funds and protect democratic institutions as well as the entire independent nonprofit sector.
The growing concentration of wealth and power is distorting philanthropy and imperiling our democratic institutions. Philanthropy has become one more way for the ultra-wealthy to use their wealth and power to exert undue influence over public policy and foundations of our democracy such as education and healthcare.
Over the last two decades, charitable giving has been on a steady upward trajectory. But this growth has masked a troubling trend: Charity is becoming increasingly undemocratic, with organizations relying more on larger donations from a smaller number of wealthy donors, while receiving shrinking amounts of revenue from donors at lower-and middle-income levels. This reliance can create pressure on organizations to shift missions and programming towards the interest of those wealthy donors.
As one philanthropic leader put it, “This isn’t the government collecting taxes and deciding which social problems it wants to solve through a democratic process…. This is a small group of people, who have made way more money than they need, deciding what issues they care about. That affects us all.”
Our goals are to:
- Increase the flow of resources to the independent nonprofit sector through a healthy, vibrant, diversified donor base (and discourage warehousing of wealth, philanthropic wealth dynasties, and inefficient private foundations).
- Protect democratic institutions from concentrated private power, including concentrated philanthropic power and influence.
- Protect the integrity of the tax system, particularly as it relates to taxing income, wealth and estates of the very wealthy (prevent charity from being an escape hatch/tax dodge).
- Protect the independence and integrity of the nonprofit sector against pressures from concentrated wealth –restore broad donor support for the sector.
- Strengthen public oversight of the charitable giving system and strengthen private association norms to prevent future abuses.
Charities Need a Pandemic Stimulus Now
The nonprofit sector is vital to our economy, employing ten percent of the private sector workforce. It functions as a main pillar of our economy and democracy, alongside business and government. But where business relies on sales and the government relies on taxes, nonprofits depend on private charity and philanthropy.
Meanwhile, some $1.2 trillion in charitable wealth is warehoused in private foundations and donor-advised funds, not distributed to the charities it is supposed to help. Wealthy donors already took substantial tax breaks when they set up these funds – sometimes decades ago – yet the law allows 95% of private foundation assets and 100% of donor advised fund dollars to remain unspent, year after year.
Let’s move more charitable wealth out of the warehouses and into the communities where it’s needed!
Take action now: sign onto our campaign for an Emergency Charity Stimulus.
The rules governing philanthropy should be overhauled to maximize the public good. Proposed reforms include:
- Levy a wealth tax on closely held private foundation assets, and establish a lifetime cap on charitable deductions.
- Make private foundation payout requirements meaningful and increase the flow of funds to working charities. Eliminate the perpetual private foundation as it is currently constituted.
- Require donor-advised funds to have a minimum annual payout and increase transparency and reporting.
- Implement a universal giving credit to broaden giving by the non-wealthy.
- Prevent abuses and encourage transparency with reforms requiring board independence, banning compensation of family members, and requiring donor disclosures.
- Create a new federal oversight agency for foundations and charities, funded by foundation excise taxes.
How Wealth Inequality Distorts Philanthropy and Imperils Democracy
The growing concentration of wealth and power is distorting philanthropy and imperiling our democratic institutions. Read more in Gilded Giving 2020.
Should Philanthropy Replace Government?
The discussion about solutions to most social problems is too often sidetracked by stories of beneficent billionaires and their charitable deeds. But philanthropy can never be – and never should be – a substitute for a fair and progressive tax system and robust public investments in poverty alleviation, infrastructure, economic opportunity, and social protection.