The Donor Revolt for Charity Reform
Prominent philanthropists, national funders, and policy organizations are launching a campaign to call for common sense charity reforms.
Supreme Court Justice Clarence Thomas flew private to sun on a superyacht with an activist donor. Sam Bankman-Fried bankrolled effective altruism with crooked crypto bets. Elon Musk pettily offered $1 billion to Wikipedia if they would change their first letter to “D.” Jeff Bezos speculates in space while his wealth accumulation far outpaces his earth-bound giving.
Everywhere we look, we see the same thing: Tremendous wealth, concentrated in fewer hands, is corroding civil society. A tiny group of mega-philanthropists exercises increasingly outsized influence over nonprofit priorities and missions. While some make an earnest effort to give back, others appear to use charity to burnish their public image, amplify their political voice, and protect their assets.
All the while, 41 percent of the money that people donate to charity gets diverted to private foundations or donor-advised funds, insufficiently-regulated giving vehicles favored by the wealthy.
Instead of making sure that the hundreds of billions that Americans donate each year actually reach organizations that work to improve society on the ground, our legislators sit on their hands. Why? There’s a whole lot of moneyed interest in preserving the status quo.
That’s why we’re launching this new newsletter solely focused on how we can fight — and conquer — ultra-wealthy dominance over philanthropy and our common good:
Inspired by activist gazettes from decades past, we’ll deliver tools to turn ideas into action right in your inbox: A sharp edit of the latest developments in the independent sector, digestible explanations of research and policy from our in-house philanthropy obsessives, insights from nonprofit workers and experts, and details on how you can use your voice to help move the money. You can expect new issues of the Reformer periodically: This isn’t a weekly dispatch like our Inequality.org newsletter.
We’re so excited to have you with us. Let’s go!
OUR LATEST RESEARCH
Giving Pledgers, American billionaires who’ve vowed to give their wealth away during their lifetimes, are wealthier as a group now than when they made their pledge. By how much? We estimate that the collective assets of our 73 living Pledgers who were billionaires back in 2010 have more than doubled since then. And these are the billionaires who’ve voluntarily opted into this scrutiny by promising generational generosity.
When these high-end donors do chip away at their pledges, they donate far more to charitable intermediaries than to working charities. Of the $12 billion in identifiable gifts of over $1 million that the biggest givers donated to charity in 2022, 68 percent flowed to either foundations or donor-advised funds (DAFs). In recent years, nearly all of the Giving Pledgers’ largest donations have flowed to intermediaries — gifts for which they receive immediate tax reductions, but which may take years to reach working charities.
Bill Gates and Warren Buffett, founders of the Giving Pledge. In 2021, Buffett donated $4.1 billion in his company stock to the Gates Foundation and four of his family foundations, avoiding an estimated $819 million in capital gains taxes in the process. And for what it’s worth: Michael Mechanic in Mother Jones notes that Bill and Melinda French Gates’ collective inflation-adjusted wealth is “now 171 percent of what it was when they launched the pledge.”
This comes at a cost to regular people. Millions of U.S. donors give directly to local charities without any reduction in their taxes: Less than ten percent of households use the charitable deduction. Wealthy donors, in turn, receive most of the taxpayer subsidies for charitable giving.
In 2022, we estimate that the public lost $73.34 billion in tax revenue through known personal and corporate charitable deductions. If we include just the little data we have about charitable bequests and the investments of charities themselves, we estimate the revenue loss is pushed up to roughly $111 billion. And if we were able to include the full value of estate and capital gains tax reductions, the true revenue costs of our current charitable system likely add up to several hundreds of billions of dollars each year.
This just cannot fly. Our latest report, The True Cost of Billionaire Philanthropy, is full of juicy details.
WHAT’S IN THE NEWS
Jeff Ernsthausen, How the Ultrawealthy Use Private Foundations to Bank Millions in Tax Deductions While Giving the Public Little in Return, ProPublica. It’s a simple bargain: The rich get huge tax breaks by donating art, property and company shares to benefit the public. But some donors collect millions while offering little or no public access.
Alex Kotch, How Fidelity, Schwab, and Vanguard Fund Hate Groups, The New Republic. Charities affiliated with giant wealth management firms allow anonymous donors to give millions of dollars to anti-LGBTQ and racist groups — and get a tax break for it.
Brendan Bordelon, How a billionaire-backed network of AI advisers took over Washington, Politico. A sprawling network spread across Congress, federal agencies and think tanks is pushing policymakers to put AI apocalypse at the top of the agenda — potentially boxing out other worries and benefiting top AI companies with ties to the network.
Ralph Nader and Chuck Collins, The True Cost of Billionaire Philanthropy, The Ralph Nader Radio Hour. A candid conversation about our team’s latest research.
OUR COURSE OF ACTION
In 2021, Giving Pledger Elon Musk donated $5.7 billion in Tesla shares to his foundation. The federal tax benefits of his donation amounted to about $4.6 billion, or almost exactly 30 percent of his adjusted gross income — the maximum he would be allowed to deduct. Musk’s wealth has grown by over 9000 percent since he signed the Pledge 11 years ago. How much has he given away so far? Less than 1 percent, says Forbes.
Tell Congress: No tax breaks for for wealthy philanthropists
unless their money actually goes to charity!
Now that we’re all nice and outraged about our broken philanthropic system, let’s fix it. There are a lot of powerful people and institutions invested in keeping things how they are. But we’ve got numbers — and we’re just getting started.
We’re building a cross-class coalition to advocate for common-sense reform. Along with thousands of regular people who recognize the dire flaws in our independent sector, over ninety wealthy donors to foundations or DAFs have signed onto our Donor Revolt. They couldn’t agree more: We have to ensure that large charitable gifts don’t languish idly for years in intermediaries, and instead flow to the causes they are intended to support.
Use this tool to send a letter to your representatives in Washington, asking them to support these reforms, among others:
- Tax deductions should be available to all, not just the rich.
- Private foundations must pay out more of the money they hold, and they shouldn’t count compensation to family members or transfers to other intermediary funds in their payout.
- Donor-advised funds must pay out their money within five years of receipt. They should also face stronger transparency requirements, and use the same tax-deduction caps that apply to private foundations.