Philanthropy is a boom industry. Of the 62 people who are major philanthropists in the United States, that were billionaires in 2010, their combined wealth has almost doubled — from $376 billion in 2010 to $734 billion as of July 18, 2020, in 2020 dollars. Nine of those 62 billionaires have seen their wealth increase over 200 percent over the decade. These include Mark Zuckerberg (1,783 percent), John Doerr (416 percent), Marc Benioff (400 percent), Ken Langone (288 percent), and Stephen Schwarzman (245 percent), among others.
Over the four worst months of the COVID-19 pandemic, the 100 living Pledgers who were billionaires in March 2020 saw their combined wealth increase by $213.6 billion — or 28 percent — from $758.3 billion on March 18 to $971.9 billion on July 17, 2020.
Philanthropy is increasingly a province of the wealthy. Amid rising economic precariousness for the working and middle classes, small-donor giving has been steadily declining for two decades. Between 2000 and 2016 (the most recent data), the percentage of households giving to charity has dropped from 66 percent to 53 percent. Any increase in giving has been driven by donations by mega-donors and mega gifts over $300 million.
The percent of total charitable deductions claimed by households making over $1 million grew from 12 percent in 1995 to 33 percent in 2017. Philanthropy is increasingly unaccountable — and taxpayers are subsidizing it. Between 2005 and 2019, the number of tax-advantaged private foundations grew from 71,097 to 119,791, an increase of 68 percent. Over the same period, their assets more than doubled, from $551 billion to $1.2 trillion. The proportion of all charitable dollars going into private foundations has tripled over the past 30 years.
When donors take tax write-offs for these gifts, that leaves ordinary taxpayers to cover the tab. If the 100 living U.S. philanthropists 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 the longer term, the rules governing philanthropy should be overhauled to maximize the public good. Proposed reforms include:
- Levy a wealth tax on closely held private foundation assets and establish 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 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.