![Institute for Policy Studies](https://assets.rbl.ms/32012663/origin.jpg)
Olivia Alperstein, olivia@ips-dc.org, 202-704-9011
Chuck Collins, chuck@ips-dc.org, 617-308-4433
Chris Fleming, chris@redhorsestrategies.com, 202-631-0929
When Mega-Donors Dominate Charitable Giving, Democracy Pays the Price
Wealth inequality distorts giving sector, posing risks to democracy and integrity of tax system.
In advance of the 10th anniversary of the Giving Pledge, founded by Bill Gates and Warren Buffett, a new report from the Institute for Policy Studies (IPS) documents a troubling trend of small donor declines with a parallel rise in wealthy mega-donors within the nation's philanthropic sector.
The report, "Gilded Giving 2020: How Wealth Inequality Distorts Philanthropy and Imperils Democracy," finds that this top-heavy philanthropy poses considerable risks to the independence of the nonprofit sector, the integrity of the tax system, and to democracy itself. It also suggests that the 2017 tax cut and the COVID-19 pandemic will worsen this drift toward inequality in philanthropy. The report can be found here.
"Philanthropy should not become an extension of private wealth and power for the richest 0.1 percent," said Chuck Collins, Co-author of report and Director of the Program on Inequality and the Common Good at IPS. "Congress needs to update the rules governing philanthropy to prevent abuses to the tax code and protect our democracy and nonprofit sector."
"The Giving Pledgers set out in 2010 to give away half their wealth and instead their assets have doubled," said Collins, citing one of the report's findings. "By giving $1.7 billion directly to 116 charities, MacKenzie Scott (Bezos) has modeled what Giving Pledge billionaires should be doing with their wealth. They should give it directly to working nonprofit charities and not to their own perpetual family foundations or donor-advised funds."
While overall giving to charity has grown over the last several decades, the report says that trend masks the growing inequality in charitable giving. Findings include:
- Small donor giving has been steadily declining for two decades. Between 2000 and 2016 (most recent data), the percentage of households giving to charity has dropped from 66 percent to 53 percent. Wage stagnation, unemployment, declining homeownership all contribute to economic insecurity and declines in giving.
- The increase in charitable giving has been driven by donations by wealthy donors and mega gifts over $300 million.
- 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.
- The percent of total charitable deductions claimed by households making over $1 million dollars grew from 12 percent in 1995 to 33 percent in 2017. The richest 1 percent of wage earners claimed one-eight of all charitable deductions, Today, they claim one-third.
The Giving Pledge, founded by Bill Gates and Warren Buffett, is a case study of top-heavy philanthropy. On August 4, 2010, 40 billionaires pledged to give away at least half their wealth before their death. But the growth in billionaire wealth has largely outstripped their capacity to give in a timely way. The "Gilded Giving 2020" report includes a preview of data from a forthcoming larger analysis about the impact of the Giving Pledge. Among these findings:
- Of the 62 living U.S. Pledgers who were billionaires in 2010, their combined wealth has increased from $376 billion in 2010 to $734 billion as of July 18, 2020, an increase of 95 percent, in 2020 dollars.
- Of these 62, 11 have seen their wealth go down either because of aggressive charitable giving or market changes. But the remaining 51 have seen significant increases in their net worth. Nine of the billionaires have seen their wealth increase over 200 percent over the decade, adjusted for inflation. These include Mark Zuckerberg (1783 percent), John Doerr (416 percent), Marc Benioff (400 percent), Bernie and Billie Marcus (311 percent), Ken Langone (288 percent), Ray Dalio (280 percent) Arthur Blank (277 percent) Stephen Schwarzman (245 percent), Scott Cook and Signe Ostby (221 percent).
- The 100 living U.S. Pledgers who were billionaires on March 18, 2020 had a combined wealth of $758.3 billion at that time. This is the date of both the beginning of the pandemic lockdowns in the U.S. and the publication of Forbes annual global billionaire survey. By July 17, 2020, their assets had surged to $971.9 billion. This means that over the four worst months of the pandemic in the United States to date, their collective wealth increased by $213.6 billion--an increase of 28 percent.
- If the 100 living U.S. Pledgers gave away half of their wealth-an estimated $485.8 billion--today, the loss of tax revenue to the U.S. Treasury would be as high as $360 billion in reduced income, estate, and capital gains taxes. This is based on a conservative assessment of the taxpayer subsidy for households in the top 0.1 percent.
The preliminary analysis in the report reveals two troubling concerns related to the Giving Pledge:
- The wealth of the U.S. billionaire class is growing so fast, even during the current pandemic, that it has outstripped Giving Pledger's capacity to give it away.
- Most of these funds will end up in family foundations and donor-advised funds that could exist in perpetuity.
The "Gilded Giving 2020" report also documents how ever-greater proportions of charitable dollars are being diverted into wealth-warehousing vehicles such as private foundations and donor-advised funds, rather than going to active nonprofits serving immediate needs.
- As charitable giving increasingly becomes the province of the wealthy, we have seen a dramatic growth in giving to private foundations and donor-advised funds (DAFs), giving intermediaries that give donors long-term control over funds and have significant tax advantages.
- Between 2005 and 2019, the number of private foundations grew from 71,097 to 119,791, an increase in 68 percent. Over the same period, their assets grew 118 percent, from $551 billion to $1.2 trillion. The proportion of all charitable dollars going into foundations has tripled over the past 30 years.
- 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. DAFs have seen their share of the giving pie triple between 2010 and 2018, rising from 4.4 percent of all individual giving to 12.7 percent. The single biggest recipient of charitable funds is the Fidelity Charitable Gift Fund. And over the past three years, six of the top 10 charity recipients have been DAFs.
"The original proposition was in exchange for a tax reduction, the donor gives up dominion over their money and it flows to a charitable purpose," said Helen Flannery, report co-author. "Why should taxpayers subsidize perpetual private foundations that give away the mandated minimum each year and chew up millions in overhead? Why should donors get substantial tax reductions for giving to donor-advised funds (DAF) with no mandate that funds flow to working charities?"
Report authors point to the Conrad Hilton Foundation as an example of a perpetual foundation that is an inefficient use of taxpayer subsidies. The Hilton Foundation has $2.8 billion in assets and spent $51 million in overhead to give away $101 million in grants in 2018. Over $18 million went to staff compensation and fees to six family-member trustees, who received $35,000 a year to serve on the board.
The report points out that risks to the public include:
- the warehousing of wealth in the face of urgent needs
- an increasingly unaccountable and undemocratic philanthropic sector
- the rise of tax avoidance philanthropy
- self-dealing philanthropy
- the increasing use of philanthropy as an extension of power and privilege protection.
Risks to charitable independent sector organizations include:
- increased volatility and unpredictability in funding, making it more difficult to budget and forecast income into the future
- an increased need to shift toward major donor cultivation
- an increased bias toward funding heavily major-donor-directed boutique organizations and projects
- increased potential for mission distortion.
The report recommends a number of solutions.
Immediate Action: Congress must implement an Emergency Charity Stimulus, a three-year emergency mandate to require private foundations to double their payout from 5 percent to 10 percent; establish a temporary 10 percent payout requirement for donor-advised funds that have no mandate. This would move an estimated $200 billion off the sidelines and into front-line working charities without increasing taxes or adding to the deficit.
Charity Reform Agenda: Rules governing the giving sector have not been meaningfully modified since 1969, a period of relative equality in the U.S. The modernization reforms should aim to:
- Protect the independent sector from undue influence of wealthy donors.
- Protect democracy and civil society, of which philanthropy is one aspect, from the undue influence of private power.
- Prevent abuse of the tax system from charitable-giving vehicles primarily used for aggressive tax avoidance or to maintain indefinite control over donated dollars.
To further these larger goals, the rules governing philanthropy should be overhauled to maximize the public good in these ways:
- Preserve a vibrant, independent charitable sector outside of private, state, and corporate control.
- Modernize incentives to encourage broad-based giving across all segments of society, particularly the non-wealthy.
- Ensure the timely flow of funds out of charitable giving instruments to the public benefit, thereby discouraging the warehousing of wealth.
- Reform tax deductibility rules to align them with the public interest and to protect the integrity of our tax system.
Proposed reforms include:
- Protect society from concentrated wealth in private philanthropy by levying a wealth tax on closely held private foundation assets and donor-advised funds and establishing 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 payout, reduce abuses from gifts of non-cash assets, 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 donor disclosures.
- Create a new federal oversight agency for foundations and charities, funded by foundation excise taxes.
The final report Gilded Giving 2020 can be found here.
Institute for Policy Studies turns Ideas into Action for Peace, Justice and the Environment. We strengthen social movements with independent research, visionary thinking, and links to the grassroots, scholars and elected officials. I.F. Stone once called IPS "the think tank for the rest of us." Since 1963, we have empowered people to build healthy and democratic societies in communities, the US, and the world. Click here to learn more, or read the latest below.
Climate Movement Sounds Alarm on Trump Picking 'Big Oil Sellout' JD Vance for VP
"JD Vance will sell out to the highest bidder, whether that's Trump or the fossil fuel industry," said one Sunrise Movement campaigner. "That makes him dangerous."
Climate campaigners reacted to former U.S. President Donald Trump's selection of Sen. JD Vance as his running mate Monday by highlighting the Ohio Republican's climate denial and strong support for the fossil fuel industry—one of his top campaign contributors.
"Like Donald Trump, JD Vance has proven that he will make it a top priority to roll back climate protections while answering to the demands of oil and gas CEOs," Sunrise Movement communications director Stevie O'Hanlon said in a statement. "Vance is one of Congress' biggest recipients of donations from oil companies."
"JD Vance not only flip-flopped on supporting Trump, he flip-flopped on climate," she continued. "He went from expressing concern about climate change before running for the Senate, to voting to gut [Environmentl Protection Agency] protections and denying that there even is a climate change crisis."
O'Hanlon added: "JD Vance will sell out to the highest bidder, whether that's Trump or the fossil fuel industry. That makes him dangerous. Donald Trump was the worst president for climate in U.S. history. JD Vance will empower Donald Trump to enact even worse damage on our planet in a second Trump administration."
Some of Trump's key first-term Cabinet appointees—including Rex Tillerson, his first secretary of state, and Ryan Zinke, who headed the Interior Department—were former fossil fuel executives or had track records of supporting the oil, gas, and coal industries.
Trump's White House tenure was also marked by an
aggressive rollback of climate and environmental regulations and protections.
Food & Water Watch Action deputy director Mitch Jones said that "just like Trump himself, JD Vance is a fossil fuel backer and climate change denier that poses a serious risk to public health and our environment."
"Among the countless reasons that Trump and Vance shouldn't be elected to lead our country, the duo represents an existential threat to a livable climate future for all Americans and people around the globe," Jones added.
JL Andrepont of 350 Action asserted that "we are facing a dire need to ward off further climate catastrophe and injustice, so let's be clear: JD Vance is another climate-denying authoritarian who poses massive danger to this country."
"He has praised the horrific Project 2025 plan and said there are 'good ideas in there,'" they continued. "He says he would be totally fine with a federal ban on abortion. And as the effects of climate change accelerate at an alarming pace right in front of our eyes, Vance is a strong supporter of the oil and gas industry who claims that climate change is not a threat."
"We must reject him and all climate deniers at the polls," Andrepont stressed.
Targeting Corporate Landlords, Biden to Unveil National Rent Control Plan
"The rent is too damn high—and rent control is a real fix," one group said, praising the proposal.
As former U.S. President Donald Trump secured the Republican nomination and announced his running mate on Monday, Democratic President Joe Biden prepared to unveil a proposal that would cap annual rent increases at 5% for tenants of major landlords.
After Biden briefly previewed the proposal during a press conference last week, The Washington Postreported on the planned announcement Monday, citing three people familiar with the matter. The Associated Press separately confirmed the plan.
Biden is set to formally introduce the proposal on Tuesday in Nevada, which "has seen among the biggest explosions of housing costs in the country," the Post noted. "Democrats have grown increasingly concerned that Trump could win the state in November."
The president, who is seeking reelection, will propose taking a tax benefit away from landlords who hike rents by more than 5% annually, according to the reporting. The plan would only apply to the existing housing stock of landlords who own more than 50 units and would require congressional approval—so it is not expected to go anywhere unless Biden wins in November and Democrats secure majorities in both chambers of Congress.
As the newspaper detailed:
The Biden administration is also pushing numerous policies to increase housing construction, through incentives to local governments to change their zoning codes and new federal financial incentives for builders.If implemented, they could bring 2 million new units to the market in addition to the 1.6 million already in the pipeline.
"It would make little sense to make this move by itself. But you have to look at it in the context of the moves they propose to make to expand supply," said Jim Parrott, nonresident fellow at the Urban Institute and co-owner of Parrott Ryan Advisors. "The question is: Even if we get all these new units built, what do we do about rising rents in the meantime? Coming up with a relatively targeted bridge to help renters while new supply is coming online makes a fair amount of sense."
While housing industry representatives criticized the reported proposal, Diane Yentel, president and CEO of the National Low Income Housing Coalition, told The Associated Press that having it in effect in recent years could have helped renters.
"The recent unprecedented increases in homelessness in communities across the country are the result of those equally unprecedented—and unjustified—rent hikes of a couple years ago," she said. "Had such protections against rent gouging been in place then, many families could have avoided homelessness and stayed stably housed."
Other rent control advocates and progressive officials also welcomed the plan, with Kendra Brooks—the first Working Families Party member ever elected to Philadelphia City Council—declaring that "this is exactly the kind of leadership that working families need!"
Jacobin's Branko Marcetic said that "this is huge," particularly considering that "housing has rapidly climbed as a cost-of-living concern (and is also under 30s' most important issue)."
Multiple campaigners and organizations credited housing advocates for pushing rent control at the national level.
"It's amazing how rapidly the conversation around rent caps has changed," noted Shamus Roller, executive director of the National Housing Law Project. "Tenant organizing has created this change. It's a proposal for Congress which will face serious headwinds but the president just called for rent caps (even if only temporarily)."
The Debt Collective said, "We will say it over and over again: The rent is too damn high—and rent control is a real fix."
"Rent caps wouldn't be a national policy proposal without tenants unions across the country making it possible through organizing," the group added. "On our way to land without landlords, remember that rent control works. The 99%'s need for a roof over our head should not be 1% profits."
Campaigners Demand Global Ban on Deep-Sea Mining
As talks resume, supporters of a moratorium are also calling for the ouster of the International Seabed Authority's leader, who faces an election on July 29.
As talks to establish global policies on deep-sea mining resumed in Jamaica on Monday, Greenpeace International renewed its demand for a moratorium on the practice, the path also backed other civil society and Indigenous groups, at least hundreds of science and policy experts, and 27 countries.
"The science is clear—there can't be deep-sea mining without environmental cost and the only solution is a moratorium. The more we know about deep-sea mining, the harder it is to justify it," said Greenpeace campaigner Louisa Casson, who is attending the United Nations-affiliated International Seabed Authority's (ISA) 29th session in Kingston.
"Governments at the ISA must not dance to the tune of the industry and approve rushed regulations for the benefit of a few over the interests of Pacific communities and the opinion of scientists," Casson argued, as companies and countries see chances to cash in on the clean energy transition by extracting metals including cobalt, copper, and nickel.
"The deep ocean sustains crucial processes that make the entire planet habitable, from driving ocean currents that regulate our weather to storing carbon and buffering our planet against the impacts of climate change."
The Associated Pressreported Monday that although the ISA has not allowed any extraction during debates, it "has granted 31 mining exploration contracts," and "much of the ongoing exploration is centered in the Clarion-Clipperton Fracture Zone, which covers 1.7 million square miles (4.5 million square kilometers) between Hawaii and Mexico."
The Mexican government last year endorsed a moratorium and Democratic Hawaii Gov. Josh Green last week signed a bill banning seabed mining in state waters, citing "environmental risks and constitutional rights to have a clean and healthy environment."
Ahead of the meeting in Jamaica, Deep Sea Conservation Coalition campaign lead Sofia Tsenikli highlighted that "gouging minerals from the seafloor poses an existential threat that goes far beyond the immediate destruction of deep-sea wildlife and habitats."
"The deep ocean sustains crucial processes that make the entire planet habitable, from driving ocean currents that regulate our weather to storing carbon and buffering our planet against the impacts of climate change," Tsenikli said. "States must now protect the ocean and not allow any more damage."
The ISA was established under the 1982 U.N. Convention on the Law of the Sea and a related 1994 agreement, and is responsible for waters not under the control of specific nations. As Common Dreamsreported earlier this month, some diplomats have accused British lawyer Michael Lodge, its current secretary-general, of trying to speed up the start of mining.
"The rush to complete the mining code was triggered by the Pacific island state of Nauru, which is expected to submit a mining license application on behalf of Canada's the Metals Company (TMC) later this year, regardless of whether or not regulations are complete," Reutersnoted Monday.
After ISA's 36-member Council negotiates the "Mining Code" over the next two weeks, its full Assembly is scheduled to meet on July 29 to vote on the next secretary-general, with Lodge facing a challenge from Brazil's Leticia Carvalho for the top post.
"It is time for change at the ISA," Casson of Greenpeace declared Monday. "A third term for Michael Lodge would not only put the oceans under threat but also risk further damaging public trust in the regulator. Mining companies are impatient to get started and mounting evidence indicates that Lodge is overstepping his supposedly-neutral role to align with commercial interests."
"The ISA must listen to millions of people and the growing number of governments calling for a halt to deep-sea mining," she added. "It is time to put conservation at the heart of the ISA's work."
In preparation for the talks in Kingston, Environment Oregon Research & Policy Center, U.S. Public Interest Research Group (PIRG) Education Fund, and Frontier Group last month released a report showing that not only would deep-sea mining destroy "a vibrant, biodiverse place, teeming with complex ecosystems and thousands, possibly millions of species," but also it isn't necessary.
"Disposable electronic devices are creating a toxic e-waste mess. Now, some mining companies are trying to convince policymakers that we need to wreak havoc on the ocean to source the materials to make more," said Charlie Fisher of the Oregon State PIRG Foundation. "This report shows that we don't need to ruin the deep sea to make the products we need. There is a more sustainable path: Make long-lasting, fixable electronics and recycle them when they no longer work."