Giving Compass’ Take:
• Chuck Collins and Helen Flannery expose the risks facing the nonprofit sector and democracy caused by growing wealth inequality and resulting top-heavy philanthropy.
• What role can you play in addressing wealth inequalities and systems that you have benefitted from?
• Read about defeating income inequality through prosperity.
The growing concentration of wealth and power is distorting philanthropy and imperiling our democratic institutions. Top-heavy philanthropy—small-dollar donor declines combined with increasing numbers of ultra-wealthy mega-donors— poses growing risks to the independence of the nonprofit sector, the integrity of the tax system, and the health of our democracy. The giving sector is increasingly becoming a tax-subsidized province of the wealthy, who exercise considerable private power over the nonprofit sector and civic life as a whole.
Private philanthropy is on a collision course with democracy. Without intervention, billionaire philanthropists will soon be shaping public policy in competition with local and state governments, which will be facing austerity conditions in the wake of a resurgent Covid-19 pandemic.
Key Findings and Recommendations
- In the past two decades, the proportion of U.S. households that give to charity has declined significantly. From 2000 to 2016, the most recent data now available, the proportion of households giving to charity dropped from 66 percent to 53 percent. As our report shows, this tracks indicators of economic insecurity such as employment, wages, and homeownership rates.
- The proportion of charitable contributions coming from donors at the top of the income and wealth ladder has increased significantly over the past two decades. In the early 2000s, households earning $200,000 or more made up only 30 percent of all charitable deductions. By 2017, the most recent year available, this group accounted for 52 percent. And the percent of total charitable deductions claimed by households making over one million dollars grew from 12 3 percent in 1995 to 33 percent in 2017. Between 1995 and 2015, top 1 percent of income-earners went from claiming one eighth to a third of all charitable deductions.
- There has been a marked increase in mega-gifting. Giving USA defines a megagift as one that accounts for at least one-tenth of one percentage point of all giving nationwide. In 2012, the threshold for mega-gifts was $50 million or more; gifts of that size amounted to $1.2 billion and accounted for 0.5 percent of all individual giving in the U.S. that year. By 2019, just seven years later, the threshold for mega-gifts had jumped to $300 million; gifts of that size totaled $3.2 billion and accounted for about one percent of all individual giving that year.
- Private foundations and donor-advised funds have both seen dramatic growth in recent years. Both of these giving intermediaries are favored by wealthy donors because of the significant tax advantages they offer. The assets of private foundations grew 118 percent over the fifteen years between 2005 and 2019, from $551 billion to $1.2 trillion. Over the same period, the number of private foundations increased by 68 percent, from 71,097 to 119,791. Donations to DAFs have increased even more rapidly, from $20 billion in 2014 to more than $37 billion in 2018—86 percent growth over just five years.
- The proportion of all charitable dollars going into foundations has tripled over the past 30 years. In 1989, just 4 percent of all charitable donations in the United States were given to foundations, rather than into direct working charities. By 2019, foundations were receiving 12 percent of all donations.
- Donor-advised funds are receiving an increasingly larger share of giving. In 2010, 4.4 percent of all individual giving went to DAFs, rather than to working charities. By 2018, that proportion had nearly tripled to 12.7 percent. The largest DAF sponsor in the country, the Fidelity Charitable Gift Fund, has been the largest single recipient of charitable giving in the United States for the past four years. And, for the past three years, six of the top ten charities have been DAF sponsors.
The charitable sector continues to experience a transition from broad-based support across a wide range of donors to top-heavy philanthropy increasingly dominated by a small number of very wealthy individuals and foundations. For most nonprofits, the one-two punch of the 2017 tax law changes and the COVID-19 crisis have only served to 4 accelerate this shift. Increasing inequality in giving poses significant implications for the practice of fundraising, the role of the independent nonprofit sector, and the health of our larger democratic civil society.