17 April 2017

In Defense of Philanthropic Freedom

by Sean Parnell, Vice President of Public Policy, The Philanthropy Roundtable

Americans are a generous people when it comes to philanthropy, more so than any other nation. As Alexis de Tocqueville wrote nearly 200 years ago, “Americans of all ages, all conditions, and all dispositions constantly form associations… religious, moral, serious, futile, general or restricted, enormous or diminutive. The Americans make associations to give entertainments, to found seminaries, to build inns, to construct churches, to diffuse books, to send missionaries to the antipodes; in this manner they found hospitals, prisons, and schools.”

Some of the language may ring odd to the modern ear (antipodes?), and it has probably been quite a while since any charity took on the task of founding a prison (yes, that really used to happen). But the general paradigm described by de Tocqueville still holds true – today in the United States there are close to 1 million nonprofit charities that have a wide range of missions, including poverty relief, education, arts of all types, and medical provision and research. And this doesn’t even include nearly 350,000 churches, synagogues, mosques, temples, and other houses of worship that often tackle some of the same roles as more-secular charities. Nearly $375 billion every year is given by Americans to charity.

There are a few foundational policies that support this generosity and diversity of charity. One is the charitable tax deduction, first enacted 100 years ago to both incentivize giving and to recognize that money given away for the public’s benefit ought not to be considered as taxable income. A second was the recognition that Americans have widely varying ideas about what constitutes the public benefit, including not only questions like whether direct relief of hunger was more important than education of the masses, but also questions about whether government action was preferable to private action and what government action might be undertaken.

It’s in part because of this second factor that the IRS definition of exempt activity includes not just “relief of the poor, the distressed, or the underprivileged,” but also lists “fostering national or international amateur sports competition,” “lessening the burdens of government,” “eliminating prejudice and discrimination,” and “defending human and civil rights secured by law,” plus nearly a dozen other activities.

This broad definition has contributed to the flourishing of charitable activity and is vital to the principle and practice of philanthropic freedom, which recognizes the right of individuals to devote their charitable giving to the causes and organizations that interest them. It’s a freedom that has allowed both the American Red Cross and the Longhopes Donkey Shelter (“dedicated to improving the welfare of donkeys”) to exist and serve their distinct missions, and has sufficient space for both the Museum of the American Cocktail and the National Woman’s Christian Temperance Union to pursue very different aims.

Not everyone is a fan of philanthropic freedom, and some believe it must be curtailed in pursuit of broader ideological and social goals. One example of this thinking is a recent op-ed in the Chronicle of Philanthropy by David Callahan, founder and editor of Inside Philanthropy, which laid out a case against the freedom of charitable givers to independently direct their donations (“Stop the Tax Breaks to Donors Who Give to Influence Policy,” March 29). The Chronicle graciously posted a letter to the editor from the The Philanthropy Roundtable responding to Callahan’s assertions, but I want to further expound upon that letter.

Callahan’s piece singles out the very notion of philanthropic freedom, noting that “This important value needs to work in better balance with other values Americans care about. Just as our society, to protect shared values such as fairness and safety, places certain limits on the economic freedom of businesses and the social freedom of individuals, it’s reasonable to place limits on philanthropic freedom to protect the value of civic equality,” with eliminating the tax deductibility of large gifts to organizations engaged in public policy research and analysis offered as one such limit.

Among the things overlooked or undervalued in the piece is that it has often been organizations working to change public policy and supported by wealthy individuals that have made some of the most significant strides in achieving greater civic equality. For example, it was a small band of wealthy philanthropists who helped fund the NAACP in its early years, such as Sears Roebuck & Co. president and part-owner Julius Rosenwald and Madam C.J. Walker, a successful female African-American entrepreneur of the era. A reasonable case can be made that no group in American history can rival the NAACP’s achievement in advancing civic equality, though the constellation of abolitionist organizations that helped spread opposition to slavery in the 1800’s might have a claim here as well. They too were heavily funded by wealthy philanthropists, such as brothers Arthur and Lewis Tappan.

Today it is often wealthy philanthropists that give voice to, rather than deny, the interests, perspectives, and priorities of tens of millions of Americans. It was funding from the Rockefeller family that launched Common Cause in the early 1970s, and today it is the generosity of those such as Tom Steyer and both Charles and David Koch that ensure disparate views on global warming held by countless numbers of Americans are able to be heard and considered.

Giving to public policy serves the public good by enriching public discourse and elevating debate on vital topics, by providing new data and analysis that can inform the public and elected officials. The divergent views often found in conflicting research and analysis can force proponents of varying policies to wrestle with uncomfortable truths and inconvenient facts and ultimately lead to better policy outcomes.
Callahan asserts that “with a historic transfer of wealth occurring and the potential for trillions of dollars to end up at nonprofits, now is the time to think long term about where we want this money to go.” But “we” should no more try to direct or limit a philanthropist’s choice of where to give than we should direct or limit what house of worship they attend or avoid, as this would take us down a road where charitable giving is subject to whatever the prevailing political and ideological orthodoxies of the day are. Forty years ago this would have likely meant reduced funding flowing to groups calling for greater protections of gay rights, while today it would scale back giving to groups working to uphold traditional notions of marriage.

Philanthropic freedom in the public policy arena ensures independent funding to independent organizations that can address prevailing thought and conventional policies, serving to either challenge or bolster reigning or rising orthodoxies and introducing new ideas into the conversation. It has allowed countless ideas on a wide range of issues to be given hearing despite a lack of popular support and even significant opposition. Undermining philanthropic freedom in the name of greater “civic equality” would leave our national conversation on important issues less robust and dominated by other sectors, including the media and politicians themselves. Such an outcome isn’t likely to be in the public’s best interest.