Promise and Peril: Philanthropy at the Precipice
To rebuild trust in philanthropy, we need to quicken the flow of philanthropic funds, make the tax code fairer, and broaden public support.
In today’s climate, we are used to seeing polls where public opinion on issues is sharply split along the political axis. Debate is highly polarized, with opposing parties staking out competing positions that seldom converge.
Inequality.org and The Giving Review might seem to represent opposite poles in such debates – an odd couple for collaboration. And yet, as we came together to discuss what’s gone awry in the current state of charitable giving and the incentives our tax system provides to donors, we learned something quite remarkable: We were in near complete agreement about that which should concern the nonprofit sector and policymakers.
We cooperated in this survey to see whether our own experience reflects public opinion more broadly – and the results suggest that it does.
But ask whether taxpayers should subsidize billionaires and the wealthy in creating foundations that will exist in perpetuity, 77 percent on the right agree with 87 percent on the left that they should not. Ask how quickly donors should have to move money out of donor-advised accounts to working charities, 74 percent of conservatives agree with the 88 percent of liberals who believe it should be within 5 years or less.
We hope you’ll read these survey results, as we do, as encouraging signs that the time is right to consider changing the current system, and that policymakers who explore reform will have strong public support behind them.
– Chuck Collins, Inequality.org and Michael Hartmann, The Giving Review
Key Insights
1. Most Americans are unaware of the details of how private foundations and donor-advised funds (DAFs) work, the scale of the nonprofit sector, and the way current tax incentives reward wealthy donors who contribute to private foundations and DAFs. However, the majority of respondents (58 percent) are aware that charities are struggling.
2. Many of the proposed policy ideas earn very solid majority support once explained:
- A strong majority (83 percent) believe that wealthy donors should be required to report large contributions due to the influence such donations may have on nonprofits.
- Another 83 percent agree that taxpayers shouldn’t have to subsidize wealthy Americans to create permanent legacy foundations, and 71 percent agree that Congress should raise the annual foundation payout from 5 percent to 10 percent.
- A good majority (75 percent) also believe there should be a maximum amount that ultra-wealthy donors can claim to reduce their taxes. This could be a lifetime maximum or an annual cap.
3. When asked how quickly money should be distributed from DAFs, 79 percent of Americans feel it should be required within 5 years (with a high portion preferring within 2 years).
4. These concepts are well supported across the political spectrum with only small differences between the left and right.
Americans are not so aware of the issues affecting DAFs, nor of the accumulation of wealth in them, but they believe charities are struggling.
Americans are largely unaware of the characteristics of foundations and DAFs.
In particular, a low percentage of Americans (less than a third) are aware of the rules affecting DAFs, and how they work for donors.
Just 16 percent are aware of the scale of wealth accumulated in foundations and DAFs. On the other hand, the majority of Americans (58 percent) believe working charities are struggling.
In short, Americans are not so aware of the role, tax issues, and benefits related to Foundations and DAFs. But as our results will show, once made aware, they believe the current rules should change.
Despite low awareness, as Americans are made aware of the facts, most are not supportive of the current situation and would like change.
There is a very high level of agreement (83 percent) among Americans that large charitable donations should be reported due to their possible influence. An equally high number (83 percent) are not supportive of wealthy donors being subsidized for their donations to create private legacy foundations.
A significant majority (71 percent) believe Congress should raise the annual payout rate for private foundations and require the same for DAFs. The population is split on the issue of anonymous donations (as long as the concern of influence is not an issue as summarized in the first point, above).
There is high agreement across the political spectrum that taxpayers should not be subsidizing wealthy donors to create permanent legacy foundations.
This is a popularly supported concept, by all types of voters. The absolute levels of agreement are very high, leaving little doubt… and low political risk for any policymakers who may consider this policy. The results are strong across political views, household income, race, age, and gender.
Most agree that large donations should be reported.
There is also strong agreement that high value donations should be reported due to the influence such large donations may have.
This is very well supported among left-leaning Americans (92 percent) And also among those on the right side of the political spectrum (74 percent). Agreement is slightly stronger among higher income households.
Overall, this policy idea is popularly supported.
The difference between this statement and the prior one about reporting big gifts hinges on the concept of potential influence.
Fewer Americans are concerned about anonymous giving, especially on the right side of the political spectrum. They feel anonymous giving is acceptable. Only when the idea of possible influence is mentioned do people become more concerned. The potential threat of negative influence changes how people feel about disclosure versus anonymity.
The idea of raising required foundation payout is also quite well supported by all.
This idea is also well supported across the political spectrum. Furthermore, high-income households agree strongly (80 percent). They have higher agreement than lower-income households (65-59 percent).
Imposing lifetime limits on tax deductions for donations receives strong support, although this policy is a little stronger on the left than the right.
On the left, we see agreement of 86 percent. This is a very high level in support of lifetime limits on claimed charitable deductions. On the right, we see lower support, (66 percent), which is still a solid majority.
Among those supporting donation limits, the threshold level is a little uncertain, but skewed towards lower levels.
Among the 74 percent who feel there should be some sort of lifetime limit for charitable tax deductions, half (i.e. 37 percent overall) feel it should be set at $100 million. Others feel it should be higher.
There are no significant differences in the results by household income level, nor by political leaning.
Although 70+ percent of Americans support requiring an annual distribution rate of 10 percent for DAFs, most feel money should move much more quickly.
These facts may be the most telling. Not only are Americans supportive of a higher payout, they support a relatively short timeline for grant-making.
Half want the grants made within just two years. And a total of 79 percent want the payout within five years. This has increased from 72 percent in 2022.
The concept of perpetuity has dropped from 25 percent to 18 percent support over the past two years.
Requiring quicker grant-making is widely supported, and more so than in 2022.
We see very strong support for the quick movement of funds, and more so over the past two years.
Requiring quicker grant-making is also widely supported across the political spectrum.
Although the political right is a bit less supportive, the large majority still support the quick movement of funds across the spectrum.
Overall, these results demonstrate widespread support, across the political spectrum, for common sense charity reforms. And it dramatizes how much the foundation and donor-advised fund lobby are out of step with public sentiments in their vigorous defense of the unacceptable status quo.
About our research methodology: The online quantitative survey, which comprises a quota sample of respondents, representative of the adult American population (weighted to match USA census data), was hosted by Ipsos in the United States via Sector Insights, within their weekly Omnibus service. You can learn more from our memo, linked here.