It is easy to take the extent of charitable giving in the United States for granted. It often gets mentioned only at the end of the year, when taxpayers are rushing to make donations in order to claim a charitable tax deduction, or, more recently, on Giving Tuesday, the “independent sector” version of Black Friday. Occasionally, one will read that Americans are the most generous people on Earth — which is certainly true, measured by the amount of GDP dedicated to charity (more than 2%, twice the EU average).
But such observations vastly understate the ways in which charitable giving and philanthropy are crucial to the American system. This is true not only in terms of their effects, but equally how it reflects the liberties we enjoy and the ways in which they make charitable organizations and giving possible in the first place.
It was, of course, Tocqueville who observed that the forming of community associations was a central and distinct aspect of American life: “Americans of all ages, all conditions, all minds constantly unite. Not only do they have commercial and industrial associations in which all take part, but they also have a thousand other kinds: religious, moral, grave, futile, very general and very particular, immense and very small; Americans use associations to give fêtes, to found seminaries, to build inns, to raise churches, to distribute books, to send missionaries to the antipodes; in this manner they create hospitals, prisons, schools. … Everywhere that, at the head of a new undertaking, you see the government in France and a great lord in England, count on it that you will perceive an association in the United States.”
What Tocqueville saw in the 19th century has remained true, to the point that the
National Center for Charitable Statistics
today estimates there to be some 1.5 million registered nonprofit organizations in the U.S. The “sector,” if you will, has persisted as it has evolved to include endowed private philanthropic foundations that complement local associations that assist schools, maintain parks, mount theatrical productions, and so much more. An estimated
87,000 grant-making private foundations
control more than $1 trillion in wealth and direct it independent of government.
But these numbers, large as they are, nonetheless underestimate the value of such enterprises if one is only focused through a utilitarian lens on their monetary effects. The sheer value of association itself, and the mutual trust and spirit of cooperation it reflects and engenders, is vastly important as well. As Robert Putnam
has observed
in his seminal work comparing northern and southern Italy, the social fabric created through mutual aid and interest organizations (he cites choral societies) lays the groundwork for the trust that makes business dealings, and resulting economic development, possible. As Putnam wrote in Making Democracy Work, “Certain communities do not enjoy a more vital civic life because they are prosperous, they are prosperous because they have a vital civic life. How do you make democracy work better? Start by strengthening the norms of trust, reciprocity and civic engagement that are indispensable to collective existence.”
Such norms may have developed organically in early America, but our system of laws and regulation has not only permitted them to continue but helped them to flourish. The very fact that our authorities, through the Internal Revenue Service, have historically defaulted to letting a wide range of organizational types qualify for the status that allows their financial support to be tax-favored reflects a spirit of tolerance central to a culture of liberty. This cannot be taken for granted, as demonstrated by the Obama-era IRS over-scrutiny of right-of-center organizations.
Broadly, we see an incredible diversity of the tax-exempt: churches of any denomination, museums, orchestras, medical research foundations, park conservancies, and, yes, groups focused on public policy (effectively political) education.
It is no exaggeration to say that this makes democracy work. The contrast with foreign adversaries is stark. One can say with good reason that civil society is essentially illegal in China: Churches meet clandestinely, and advocacy groups are unimaginable in a one-party state. From the Communist Party perspective, self-organized groups not controlled by the state pose a threat. This is not an inaccurate fear. The British found that out when they tried to subdue colonial Boston’s Committee of Safety and the subsequent rebellion it fostered.
In our current context, the legal tolerance for and the proliferation of all manner of charitably supported groups are a societal hedge against what John Adams called the tyranny of the majority. Our public discussion may be less civil than we might like today, but it remains robust. Not only divergent opinions but divergent analyses, whether of social science or medical science, brawl. This is what makes Facebook’s self-appointed role to decide what is beyond the pale so worrisome — and such a departure from American tradition.
The charitable tradition serves as a hedge in other ways as well. Today, government places all sorts of bets on research ideas and funnels multiple billions toward them. It is not an effort that should be gainsaid. But we continue to profit, as it were, from all sorts of independent, private research bets. The confidence and bravado that permit for-profit entrepreneurs to build their fortunes can also lead them to make bold and winning gambles in other fields.
A powerful example has been the
Gates Foundation’s support
for the mRNA research, originally conceived as a means to develop an AIDS vaccine, that laid the groundwork for the COVID vaccine. The core idea had long been dismissed by mainstream researchers, and its pioneer, Hungarian-born Katalin Kariko, was denied tenure at the University of Pennsylvania. Gates was not the idea’s first source of support, but its 2016 grant to Moderna (in anticipation of receiving vaccines it could distribute to the developing world) well predated COVID.
Neither is research the only area in which philanthropic free-thinkers have moved the needle. Tech titan Peter Thiel’s 2013 announcement that he would provide grant support for promising students who agree to leave college and pursue their ideas independently sparked a subsequent and ongoing questioning of the value of higher education broadly.
As important as it is to appreciate the American charitable tradition, it is equally so to be vigilant about threats to it. They are numerous. Stanford’s Rob Reich, for example, (not to be confused with the former Secretary of Labor Robert Reich) has suggested in his book
Just Giving
that the charitable tax deduction, which is a part of the tax code dating back to the inception of the income tax, be reserved for donations to groups that directly help the poor. Even religious institutions, in his view, more closely resemble clubs than organizations that help those in need. Such blinkered thinking obscures the fact that those of modest means can be assisted, indeed uplifted, by exposure to museums, libraries, orchestras, and open spaces.
Yet we are on the verge, for the first time, of making the charitable tax deduction contingent on specific donor behavior. The proposed
Accelerating Charitable Efforts
Act would deny the tax deduction to those directing funds to a donor-advised fund (an individual charitable giving account) unless donors agree to distribute funds within 15 years. Those who would set up local scholarships to continue without a time limit would be voted off the island.
What can appear to be benign government intervention to assist the reach of charitable giving should worry us, too, as a philanthropic Trojan horse. During the Obama administration, the Social Innovation Fund proposed scaling up effective charitably supported ideas by providing matching funds. Although this may sound benign, it was a version of central planning antithetical to the sector’s independence. The Fund administration designated select goals for which it would provide matching amounts. Those to receive priority included “economic opportunity, healthy futures, and youth development,” which was interpreted by the staff of the Corporation for National and Community Service, a federal agency. This was a stake through the heart of true philanthropic freedom, disguised as harmless support. (For a larger treatment of the program, see my 2015 book,
Philanthropy Under Fire
, and my 2019 book, Who Killed Civil Society?)
Charitable giving and all that it supports are not frosting on the American cake. They are integral to the American experiment: aspects of democracy that, at the same time, further it. We must not take them for granted.
Howard Husock is a senior fellow in domestic policy studies at the American Enterprise Institute.
