The news coming out of Washington these days is a constant onslaught. Regardless of whether you agree or disagree with the Trump administration’s policies, there is no argument—the president is, thankfully, taking action to rein in out-of-control government spending.
As President Donald Trump gets government out of the way, philanthropy is the perfect partner to help ensure vulnerable Americans are not left behind. Charitable donors play a vital role empowering local leaders and organizations that are most effective at solving problems in their communities. Especially when the government cannot, or perhaps more importantly, should not.
It’s no wonder then that the philanthropic community is watching the tax debate with great interest. The key question is: will lawmakers target charitable giving as they consider how to pay for extending the 2017 Trump tax cuts?
One of the latest alarming ideas making the rounds is increasing taxes on endowments. While universities are currently in the hot seat for good reason as some may have been violating the law, misguided intellectuals on the Left and Right have suggested higher taxes on private foundation endowments should also be on tax reform’s menu.
With inflation still high and fears swirling of a potential economic downturn, Americans should be concerned about what higher taxes on charitable giving could mean for the causes and communities they care about. Time and again, civil society has stepped up, filling the gaps and providing critical care and services for those who need them the most. Philanthropy can and will continue to do this—if lawmakers don’t seize Americans’ charitable dollars for Washington’s personal slush fund.
Charitable endowments—funded voluntarily by generous private citizens—can act like charitable saving accounts that earn interest and grow over time, making even more charitable dollars available for the future. These funds are the hard-earned dollars of everyday Americans, set aside by those who want to do good in society.
As the Roundtable’s Joanne Florino has noted:
“All told, the U.S. boasts around 185,173 foundations, according to the latest data from Cause IQ. Of those, 145,262 are private foundations with 90,247 of that total number having less than $250,000 a year in revenues. These small givers provide a vital lifeline to help people in their communities and enrich and strengthen our nation’s civil society. Without their generosity, we would all be far worse off.”
The misguided intellectuals calling for higher taxes on foundations look only at the very large foundations commanding billions and see dollar signs. But the true impact will be felt by every charitable organization, and not only foundations. As higher taxes suck dollars out of charities and funnel them into the U.S. Treasury, foundation grantmaking will be forced into decline, resulting in fewer and fewer dollars for the people and communities they support over time.
Without charitable giving, millions of Americans would be robbed of access to educational opportunities to create a better life. Services that provide basic necessities for survival—food, shelter, clothing—would suffer, and the benefits of life-saving medical innovation and advancements would halt. Every dollar small family givers, community foundations and donors in rural areas have to fork over to Uncle Sam is a dollar that is not going to someone in need.
So why does anyone think allowing the IRS to take these dollars out of private hands and give them to the government is a good idea?
The argument goes that because many of the ideologically Left mega-foundations have abandoned American values, the time is ripe for Republican majorities in Washington to use the government as a weapon to punish them and force them to close. But conservatives believe we should be limiting government’s power over private individuals – not using the government as a sledgehammer to attack those we disagree with.
The Right knows the danger of wielding the tax code as a weapon better than most with the politically motivated IRS attacks on conservative nonprofits during the Obama Administration etched in recent memory. Lawmakers should remember they aren’t just setting policy, they are setting precedent.
The Roundtable has noted consistently—the freedom to give is for everyone, regardless of charitable mission, and we should never discriminate on those grounds:
“Charitable giving is an integral part of the American experiment. Suggesting that government should favor or penalize philanthropic endeavors based on politics and ideology will ultimately destroy private giving. We should not be interfering with donors working hard to benefit their communities. Instead, we should be empowering them.”
In recent years, foundation giving has been a bright spot, increasing nearly 15% from 2021-2023, according to Giving USA data.* This generosity was a lifeline during the COVID-19 pandemic as charitable giving offered flexibility and speed to get dollars to where they were most needed compared to a slow and bureaucratic government.
It’s true: philanthropy shines in a crisis—history has shown this repeatedly. So where will philanthropy be during the next crisis? Potentially extinct, if lawmakers tax their endowments, and ultimately our most generous organizations, out of existence. And that would be devastating for Americans from all walks of life.
Multi-billion-dollar mega foundations may be the ones that get flashy headlines. But we cannot ignore the vast majority of foundations, which are engaged in their communities doing the important work, quietly and effectively. They are helping change the trajectory of people’s lives. Government should see philanthropy as an asset in its effort to right-size a bloated federal bureaucracy and tackle inefficient and ineffective social welfare programs, not a well-heeled piggy bank.
Charitable giving is a uniquely American tradition that, over generations of our country’s history, has improved our quality of life in ways that have altered the course of human history for the better. We must do everything we can to protect it, not just for givers, but for those who have and will continue to benefit from their generosity.
* According to Giving USA’s annual reports on philanthropy, foundations gave $103.53 billion in 2023, $105.21 billion in 2022, and $90.88 billion in 2021. A publication of Giving USA Foundation, these reports are researched and written by the Indiana University Lilly Family School of Philanthropy. Available online at www.givingusa.org.
