Our friends at the National Taxpayers Union Foundation (NTU) recently published a blog debunking many of the claims in the Institute for Policy Studies’ (IPS) July report entitled “Gilded Giving 2022: How Wealth Inequality Distorts Philanthropy and Imperils Democracy.”
Recommendations from that study’s authors include advocating for draconian regulations of the charitable sector, such as increasing the annual foundation payout requirement to 10% of assets and mandating donor-advised funds pay out the entirety of any donations within three years.
While IPS claims these changes would “discourage the warehousing of charitable wealth, … align tax incentives with the public interest and … encourage broad-based giving across all segments of society,” NTU pushes back, saying, “Not only are the recommendations unhelpful, they can damage the ability of groups to aid and advocate on behalf of causes they believe in.” Senior Attorney Tyler Martinez goes on to make several points that are worth highlighting, citing IPS’ use of erroneous data, its “troublesome call for bigger government” and the harmful impact of its proposed policies on donor privacy and donor-advised funds.
Erroneous Use of Data
First, Martinez says, the IPS report “misreads its own underlying data,” reporting only on one data set of four released by the Lilly Family School of Philanthropy. Martinez writes:
The report relies on the biennial Indiana University’s Lilly Family School of Philanthropy survey on charitable giving. The University’s authors disclose the sources of their data, their limitations and their strengths. While the academics relied on four data sets, IPS reported only on one, the Philanthropy Panel Study (PPS). The PPS differs from the other three studies in including religious giving in its study of charitable giving. As is well researched, religious affiliation and giving are down over the last few decades as the United States generally becomes more secular. The authors of the Indiana University study acknowledge this significant impact on the results of the PPS, but that does not make the Institute for Policy Studies paper.
The report relies on the biennial Indiana University’s Lilly Family School of Philanthropy survey on charitable giving. The University’s authors disclose the sources of their data, their limitations and their strengths. While the academics relied on four data sets, IPS reported only on one, the Philanthropy Panel Study (PPS). The PPS differs from the other three studies in including religious giving in its study of charitable giving. As is well researched, religious affiliation and giving are down over the last few decades as the United States generally becomes more secular. The authors of the Indiana University study acknowledge this significant impact on the results of the PPS, but that does not make the Institute for Policy Studies paper.
In the past, the Roundtable has similarly had to debunk incomplete or misinterpreted research. In a policy brief released last year, we proved there is no evidence for allegations that family foundations claim higher expenses. Second, we disproved the assertion that an increase in donor-advised funds has cannibalized other forms of charitable giving. Sound data are instrumental because it frames the policy debates that ultimately govern the sector.
A Wealth Tax on Foundations
Martinez goes on to say that, in addition to its incorrect use of data, IPS proposes “bad solutions,” including advocating what is essentially a wealth tax:
In a troublesome call for bigger government, the IPS report calls for new taxes to fund a new federal agency to oversee charitable giving — removing the responsibility from the IRS. The progressive think tank recommends funding the office via excise taxes on foundations.
As we noted in a recently published report “Wealth Tax Proposals Threaten Philanthropy,” populists from the right and left have found common cause in attempts to confiscate money from wealthy individuals. Of course, this wealth tax is premised on the idea that government bureaucrats can better dictate how to expend resources than philanthropists passionate about investing in their communities.
Donor-Advised Funds and Donor Privacy
Beyond its recommendation of a new agency, IPS report authors support what Martinez calls “heavy restrictions” on donor-advised funds and “troublesome” requirements affecting donor privacy. These are two issues the Roundtable has written about extensively. NTU succinctly identifies how artificially swift payout rates, like those mandated in the so-called King-Grassley bill, will have hazardous impacts:
IPS wants to require quick payout of funds and extensive donor disclosure. Quick payout would only pump more money into the nonprofit sector without a chance for clear oversight to ensure funds are used wisely and as promised.
Martinez is right that DAFs allow for thoughtful, strategic giving. Some issues philanthropists care about can take generations of investment to resolve and others are unanticipated crises that call for immediate giving. For example, a bipartisan coalition on the U.S. House Ways and Means Committee said when the COVID-19 pandemic struck, frontline aid workers quickly received funds because money already stored in DAFs was readily accessible for distribution. If IPS’s DAF proposal had been in effect, there would have been fewer funds available to quickly contribute to the crisis.
Similarly, donor privacy protections are integral to the health of private philanthropy. Martinez notes they also are a constitutionally protected right:
Donor privacy is an important First Amendment right, particularly for those who give to controversial causes. For decades, the Supreme Court has consistently shielded organizational donors and supporters from generalized donor disclosure, and it continued to do so just last year.
In fact, that Supreme Court case is Americans for Prosperity Foundation v. Bonta, in which the Roundtable filed an amicus brief on behalf of the prevailing petitioners. Most recently, the Roundtable published “Unheralded Generosity: A 50-State Look at Anonymous Giving,” a database of stories that highlight how generosity flourishes when donors are free to give to causes without fear of harassment or intimidation. These stories range from COVID-related mask donations to an anonymous donor from Ohio helping free a group of missionaries kidnapped by a Haitian gang in 2021. Protecting the right to private giving is crucial to ensure the charitable sector thrives for generations to come.
In all, we commend NTU for its thorough defense of philanthropic freedom. Martinez’s article demonstrates – and the Roundtable agrees – that defending the charitable sector is a universal interest because when philanthropic freedom is threatened, ultimately, we all suffer for it.
