You
might have heard about a certain
French writer who visited the
United States in 1831. Alexis de
Tocqueville is an all-time emigre
superstar, a beloved bard, and the
author of Democracy
in America.
One of
Tocqueville's favorite things about our
country then is something many of us would
name today: Our generosity.
The
Frenchman marveled at the Americans who
came together to help one another,
financially and socially, in voluntary
associations—paying what he called a
"self-tax for the common good" and showing
"self-interest properly understood."
To
historian Olivier Zunz, Tocqueville's
"grasp of the relationship between
interest and altruism remains essential."
The notion that one's own well-being is
inextricable from the well-being of one's
community is what drives the generosity of
Americans today.
And
it
is a lovable, laudable national
sentiment. Americans
are
among the most generous people
on earth,
at least when measured by
charitable donations. Our
plentiful GoFundMes, mutual aid
groups, and even splashy
charitable social media channels
speak to a civic culture that both
prizes and relies on philanthropic
behavior.
Even our
tax system reflects this. We can deduct
big charitable contributions from our
taxes, and charitable organizations are
largely tax-exempt. So, we have really
made philanthropy a kind of
"self-tax"—often a literal substitute for
taxes in general.
But there
are real downsides to this arrangement,
especially since it is linked with our
country's indefensible economic
inequality.
Our
tax
system differentiates
public, working charities—like
Feeding America or the YMCA, which
serve people on the ground—from
private foundations, like the Bill
and Melinda Gates Foundation,
which mostly make grants to other
charities.
Since
they aren't providing services themselves,
foundations are required to pay five
percent of their assets each year to
working charities. But there are many ways
to get around these laws, which are meant
to make sure the public actually benefits
from the private organizations that take
these tax benefits.
Donor-Advised
Funds
(or DAFs), a kind of loophole
charitable vehicle created in the
1970s, allow for donors to take a
tax break. But, unlike
foundations, DAFs aren't subject
to payout or transparency
requirements. By now, some
commercial donor-advised funds
have skyrocketed to become the top
recipients of charitable
dollars—together, they held more
than $234
billion
in 2021.
Is
this
a fair system, honoring the
Tocquevillian premise? Not
anymore. My colleagues at the
Institute for Policy Studies have
determined that
charity is now dangerously
dominated by the ultra-wealthy.
America's
richest donors make up a greater share of
the charitable sector than ever before.
And they're drowning out the voices of
regular donors: Rather than supporting
popular on-the-ground charities, they're
giving more and more of their money to
their priorities and intermediaries, like
DAFs and foundations, that they control.
There has
never been more money earmarked for
philanthropic purposes, but it lies fallow
in endowments or under-regulated funds.
Warehousing money during our time of
crisis siphons away tax dollars for public
services. Instead, some "philanthropists"
fund… nothing.
That is
not "self-interest properly understood."
It is just garden-variety selfishness.
When
you
consider top-heavy philanthropy
together with the fact that the
richest 1 percent of Americans
currently evade over $160
billion
in taxes
owed each year, it is clear that
we are falling short of
Tocqueville's ideals.
"The
early American civic vitality that so
entranced Alexis de Tocqueville," writes
historian Theda Skocpol, "was closely tied
up with the representative institutions"
of "a very distinctive national state."
In other
words, Tocqueville observed charity
working in concert with our democratic
government. But now it too often can do
the opposite. Taxpayers are subsidizing
donors who retain control of their wealth
instead of sharing it through philanthropy
and burnishing their public images in the
process.
Concentrated
wealth
and power exploit
philanthropy and distort its
service to the common good. We
need to end the use of charitable
vehicles for tax dodging or wealth
warehousing and increase the flow
of money to working charities.
Most
importantly, we need to ensure that
charitable giving never substitutes for
robust public funding. The universal right
to a fair, dignified life—quality health
care, housing, education, and
opportunity—shouldn't depend on voluntary
generosity. It should be a public
guarantee.
Now
that's
something we can all love.
