IIt is easy to take the scale of charitable giving in the United States for granted. It is often only mentioned at the end of the year, when taxpayers rush to donate to claim a charitable tax deduction, or more recently on Giving Tuesday the “Independent Sector” version of Black Friday. Occasionally you will read that Americans are the most generous people in the world – which is certainly true when measured by the amount of GDP that goes to charity (more than 2%, double the EU average).
But such observations far underestimate the way in which charitable giving and philanthropy are vital to the American system. This applies not only to their impact, but also to the freedoms we enjoy and how they make charitable organizations and donations possible in the first place.
It was, of course, Tocqueville who noted that the formation of community associations was a central and distinct aspect of American life: “Americans of all ages, backgrounds, and minds unite constantly. Not only do they have trade and industry associations in which everyone participates, but also a thousand others: religious, moral, serious, senseless, very general and very special, huge and very small; Americans use clubs to hold celebrations, found seminars, build inns, erect churches, distribute books, and send missionaries to the antipodes; in this way they create hospitals, prisons, schools. … Wherever you see the government in France and a great lord in England at the head of a new venture, you can be sure that you will see a union 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 that there are about 1.5 million registered nonprofits in the US, including private philanthropic foundations that run local associations supplement, support schools, maintain parks, conduct theatrical performances and much more. An estimated 87,000 private grant-making foundations control and operate independently of the government over $ 1 trillion in assets.
But these numbers, large as they are, still underestimate the value of such companies if one only considers their monetary impact in a utilitarian way. The value of the association itself and the mutual trust and spirit of collaboration that it reflects and creates are also of great importance. As Robert Putnam noted in his pioneering work comparing northern and southern Italy, the social fabric created by mutual aid and interest organizations (he quotes choir associations) provides the basis for trust, business relationships and the resulting economic development . As Putnam wrote in Let democracy work, “Certain communities do not enjoy more vital civil life because they are wealthy, they are affluent because they have vital civil life. How does democracy work better? Start by strengthening the norms of trust, reciprocity and civic engagement that are essential to collective existence. ”
Such norms may have evolved organically in early America, but our system of laws and regulations not only allowed them but helped them to flourish. The very fact that our agencies, through the Internal Revenue Service, have not in the past allowed a wide variety of types of organizations to qualify for the status that enables their financial support to be tax-exempt, reflects a spirit of tolerance that is essential for a Culture of freedom is central. This cannot be taken for granted, as demonstrated by the Obama-era excessive scrutiny of right-of-center organizations by the IRS.
By and large, we see an incredible variety of tax exempt: churches of all denominations, museums, orchestras, medical research foundations, park protection organizations and, yes, groups that focus on civic (effectively civic) education.
It is not an exaggeration to say that this is how democracy works. The contrast to foreign opponents is strong. There is good reason to say that civil society in China is fundamentally illegal: churches meet secretly, and advocacy groups are unimaginable in a one-party state. From the Communist Party’s point of view, self-organized, non-state-controlled groups pose a threat. This is not an imprecise fear. This is what the British found out when they tried to subdue the Boston colonial Security Committee and the subsequent rebellion that it promoted.
In our current context, legal tolerance for and proliferation of all kinds of charitable groups is a social safeguard against what John Adams called the tyranny of the majority. Our public discussion may be less civilized than we’d like today, but it remains robust. Not only different opinions, but also different analyzes, be it social science or medical, are in dispute. This is what makes Facebook’s self-proclaimed role in deciding what is beyond borders so worrying – and such a departure from American tradition.
The charitable tradition also serves as a safeguard in other ways. Today the government places all sorts of bets on research ideas and pours billions into them. It is not an effort that should be contradicted. But we continue to benefit from all kinds of independent, private research bets, so to speak. The confidence and bravery that enable for-profit entrepreneurs to build their wealth can lead them to bold and profitable gambling elsewhere as well.
A strong example is the Gates Foundation’s support for mRNA research, which was originally intended as a means to develop an AIDS vaccine and which laid the groundwork for the COVID vaccine. The core idea had long been rejected by mainstream researchers, and its pioneer, Hungarian-born Katalin Kariko, was denied employment at the University of Pennsylvania. Gates wasn’t the first source of support for the idea, but the grant for Moderna in 2016 (pending receipt of vaccines that could be distributed to developing countries) was well ahead of COVID.
Research isn’t the only area where philanthropic free thinkers have moved the needle. Tech titan Peter Thiel’s 2013 announcement to support promising students who would agree to quit college and pursue their ideas independently sparked a subsequent and lingering question about the value of higher education on a broader basis.
As important as honoring America’s charitable tradition is, it is equally vigilant to be vigilant about threats. They are numerous. Stanford’s Rob Reich, for example (not to be confused with former Labor Secretary Robert Reich) suggested it in his book
That the charitable tax deduction, which is part of the tax code from the introduction of income tax, is reserved for donations to groups that directly help the poor. In his opinion, religious institutions are more like associations than organizations that help the needy. Such narrow-minded thinking hides the fact that people with modest means can be supported, even encouraged, through contact with museums, libraries, orchestras and open spaces.
But for the first time we are on the verge of making the charitable tax deduction dependent on specific donor behavior. The proposed Accelerating Charitable Efforts Act would deny tax deduction to those who direct funds to a donor-advised fund (an individual donation account) unless donors agree to distribute funds within 15 years. Those who would set up local scholarships to continue indefinitely would be voted out of the island.
What may seem like benevolent government intervention to obtain charitable giving should also concern us as a philanthropic Trojan horse. During the Obama administration, the Social Innovation Fund proposed replenishing effective, charitable ideas through the provision of matching funds. While this may sound innocuous, it was a version of central planning that ran counter to the independence of the sector. The fund administration has defined selected goals for which it would make appropriate amounts available. Those given priority included “Economic Opportunity, Healthy Future, and Youth Development,” as interpreted by staff at 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 more comprehensive treatment of the program, see my 2015 book,
Philanthropy under attack
, and my book from 2019, Who Killed Civil Society?)
Charitable giving and everything they support are not a frosting on the American cake. They are an integral part of the American experiment: aspects of democracy that they promote at the same time. We cannot take them for granted.
Howard Husock is a senior domestic policy fellow at the American Enterprise Institute.