Interview by Katherine Mangu-Ward
Americans love to give away money. In 2008, as the economy flailed and the government bailed, we still donated $300 billion to charity, or about $1,000 per person. That figure includes everything from the Bill Gates/Warren Buffett charitable colossus to a bus driver at church dropping a $5 bill in the collection plate.
One reason for the ongoing frenzy of giving is the fact that Americans do not have to pay federal income taxes on money they hand over to philanthropic organizations. But as budgets get ever tighter, state and federal governments have started scrounging for change in the sofa cushions. In March 2009, spitballing about ways to pay for his health care overhaul, President Barack Obama suggested reducing rich people’s tax deduction for charitable giving.
The response from the nation’s schools, churches, museums, soup kitchens, and thrift shops was swift and angry. A coalition of charities and other groups concerned with giving—including the Philanthropy Roundtable, an association of foundations and other charitable organizations—sent a strongly worded letter to Senate Finance Committee Chairman Max Baucus (D-Mont.) declaring that “with so many Americans relying on the charitable sector, now is simply not the time to jeopardize the charitable gifts that are so important to its strength.”
Obama defended his proposal, arguing that if a donation is “really a charitable contribution, I’m assuming [the tax rate] shouldn’t be a determining factor as to whether you’re giving that $100 to the homeless shelter down the street.” The president also pulled out one of his favorite lines, noting that the tax hike would affect “only 1 percent of the American people,” but then he revealed perhaps more than he intended: “I think it is a realistic way for us to raise some revenue from people who’ve benefited enormously over the last several years. And, you know, ultimately, if we’re going to tackle the serious problems that we’ve got, then, in some cases, those who are more fortunate are going to have to pay a little bit more.”
If you think that’s just ordinary political boilerplate, remember that Obama wasn’t talking about an income tax or a capital gains tax. He was talking about a tax on money going to charities. The people he wanted to hit with a bigger tax bill are already “paying a little bit more.” They just don’t happen to be sending their money via the White House and Congress.
The proposal died, but the attitude behind the remarks continues to hover over American philanthropy. Comprehensive tax legislation is expected in 2010, and the revised rules may include new requirements for organizations with tax-exempt status. The Internal Revenue Service has already been gaining greater oversight of nonprofits in recent years, both by collecting more information about the groups and by increasing application fees.
At the state level, activists are agitating for laws mandating more diversity on foundation boards and more government control over how and where private philan- thropic dollars are spent. Even when the bills don’t pass, they often scare charities into making accommodations. In California, for example, the Greenlining Institute persuaded the State Assembly to consider the Foundation Diversity and Transparency Act, which would have mandated disclosure about the number of ethnic, sexual, and other minorities on the boards of large foundations and their grant recipients—an explicit step toward mandating quotas. After intense negotiations, the bill was withdrawn, and the state’s 10 largest foundations not coincidentally agreed to spend $20 million through minority-led groups serving minority communities, $10 million on leadership training and technical assistance to minority-led organizations, and additional cash for ongoing research and analysis about the role of minority organizations in the Golden State.
Adam Meyerson, president of the Philanthropy Roundtable since 2001, writes and speaks frequently about philanthropic freedom, donor intent, and the role of charitable giving in a free society. Senior Editor Katherine Mangu-Ward interviewed Meyerson at the Philanthropy Roundtable’s Washington, D.C., offices in November.
reason: What do you say to people who object to the fact that tax-exempt donations are going to the opera or to Harvard when there are genuinely needy people in the world?
Adam Meyerson: We’ve had a long tradition where, so long as they make contributions to genuinely charitable causes, Americans can decide where and how to give away their money voluntarily. We’re talking about voluntary action here. They could spend it on their yachts, but they want to give their money to other institutions.
Philanthropy and charitable giving are central to American life and have been since the beginning of the republic. Philanthropy supports our churches and synagogues, medical research, health care, the arts, the environment. Our colleges and universities are the best in the world thanks to philanthropy. If you look at almost every major controversial issue, whether that be abortion or gay marriage or stem cell research or marijuana legalization, the philanthropists are on both sides of those issues helping to promote and advance a really robust debate.
reason: Let me put it more bluntly. How would you reply to someone who says, “There are lots of poor black people in America. Why are white people giving money to each other to put on ballets?”
Meyerson: Let me give you two arguments. One illustrates the importance of freedom and the other is to look at what the philanthropist is actually giving to.
One of our great philanthropic heroes was Julius Rosenwald. He was one of the builders of Sears Roebuck. In the 1920s and ’30s, on a matching basis, he funded 5,000 schools for African-American children in the rural South. At one time, one-third of all African Americans owed their education to Rosenwald schools. That could not have been done without the freedom and independence of a donor to make decisions about where to spend his money. It wasn’t being done by the state. It couldn’t really be done by business. That’s a great strength of philanthropy that we see over and over again: the willingness to support an unpopular idea, something before its time.