Thoughts on Philanthropy from The Giving Review’s “Conversations” in Second Half of 2024

An end-of-year collection of interesting and insightful thinking about grantmaking and giving

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Taxes and the Nonprofit Economy

We’re seeing a very large increase in the “amount of business-like income that’s being generated by a lot of these large,” tax-exempt, nonprofit institutions, “whether they’re hospitals, universities credit unions, insurance companies, and so forth.

“This is undermining free enterprise when you have large nonprofit, non-taxed, or tax-exempt organizations competing directly with for-profit organizations. It really undermines free enterprise and I think that that’s a danger.

“I just think that that’s completely unfair because these nonprofits are really competing from an advantage, a tax-subsidized advantage, where taxpayers are effectively subsidizing them because of their non-for-profit status and their tax-exempt status, and that gives them a big leg up in competing with a lot of these for-profit companies.

“No for-profit organization or company should be forced to pay taxes in order to subsidize their competitor down the street. That’s really unfair.

…

The huge and growing nonprofit economy is “completely outside of the income-tax system. If we’re looking at fundamental tax reform, we’ve got to consider trying to bring that back into the tax base in order to … provide fairness, more revenues, and some equal justice.”

As most of the individual provisions of the 2017 Tax Cuts and Jobs Act expire next year, “there are a lot of members on both sides of the aisle who would want to increase the corporate income tax, which would be a very harmful thing to do, or increase the taxes on small businesses or what we call pass-through businesses. Both of those would be bad economics, bad tax policy. But if we expand the tax base into this nonprofit sector, we can avoid raising taxes on other sectors that would be more harmful. Provide some balance across the industries, and it would be pro-growth at the end of the day.”

—         “A conversation with the Tax Foundation’s Scott Hodge (Part 1 of 2),” August 12, 2024, and “A conversation with the Tax Foundation’s Scott Hodge (Part 2 of 2),” August 13, 2024

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Rural Philanthropy

“I think the family and cultural traditions of many rural places have been set for generations, and if a national funder sanctions one nonprofit versus another one in a community, that kind of tips a lot of things. That that might be okay; maybe they need to be chipped. But it could be disruptive, where it’s just more painful than positive.

…

“We’ve got to be looking at places. I often use the phrase ‘Place up and program down.’ The best rural philanthropy is placed-based.” It’s “really cognizant of the history of places, the institutional stakeholders, the old families with money, [and] engages them.” It’s “not so issue-specific, unless there is an urgent” need.

“People working across issues,” he adds, do so “across political divides. … Contrary to some of the media portrayals, people in smaller rural places are not spending 100% of their time talking about the presidential election. They might be talking about why that school is falling down while no one is paying attention or how they can or can’t afford certain youth-sports things. But they’re not fixated on the national political scene.”

—         “A conversation with PhilanthropywoRx’s Allen Smart (Part 2 of 2),” August 20, 2024

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Philanthropic Progressive Managerialism

What the Ford Foundation and “other big foundations represent is a managerial worldview. The managerial worldview is fundamentally that everything can and should be managed—like, everything. So, we see in recent years, just to take one example, the pandemic. The dominant idea was that we need to manage everything in society to try to solve this problem.

“People at the foundations, like the Ford Foundation—for a long time now, at least from the ‘60s—really believe … a better world is possible and that they are the ones who can do this, the elect, who will impose their order on the rest of the world. … [T]here’s a temptation, even when you have a conservative foundation, for that foundation to adopt a managerial approach, which is very easy because their whole existence is to accomplish goals.”

There are some “lines of effort” against philanthropic progressive managerialism. “The first is to use state power to hold these organizations accountable, because what we’re talking about when we talk about foundations, these big left-wing foundations, is that they are transmuting oligarchic money into left-wing policy as a way to avoid democratic accountability.

“[I]t would be perfectly reasonable, if conservatives were to take power, in a sustained way to use the power of the state to bring these foundations to heel. … The laws for 501(c)(3) nonprofits are intended … if I’m getting this right, for only for charitable, religious, and educational purposes. They’re explicitly banned from political activity, and yet there’s so many nonprofits in the United States and the foundations that fund these nonprofits that basically carry out very political activity. I think in many cases, the government should look at stripping those nonprofits of their untaxed status or at least threatening to do so.”

—         “A conversation with The Upheaval’s N. S. Lyons (Part 1 of 2),” September 3, 2024

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Conservatism and Conservative Philanthropy

“I think it’s fair to say that most of philanthropy on the center-right was surprised and some of it was quite upset by the rise of a new conservative populism. Part of it was perhaps a sense that the policy impetus of the new populist tendency on the right was going in the wrong direction. So some of it was a principled objection.

“I fear that some of it was also just a sense of disappointment that sort of long-laid plans that had been put into motion at conservative institutions that had been the recipients of philanthropic support had been derailed and that, in fact, a number of sort of scrappy intellectual entrepreneurs or policy entrepreneurs or political outsiders were finding a momentum that all of these investments in movement conservatism were not producing. …

“I do think there’s also a bit of competitive pressure coming on conservative philanthropy, at least in its traditional forms, from Silicon Valley entrepreneurs and others who have considerable personal wealth, and considerable networks of wealth.” They “are very interested in pursuing entirely new strategies” and supporting “entirely new institutions,” and they’re “often doing things which are shaking up what can sometimes be a rather-bureaucratic” mindset in conservatism and its institutions.

There are “large swaths of the American public feeling alienated from and ill-served by America’s institutions and America’s leadership class. Philanthropy, I think, needs to adjust. “There are philanthropic organizations and institutions with significant resources which have tried to creatively engage with this environment, which have tried to bring together some of the new thinking that’s happening on the right about economics, with various surprisingly progressive or left-of-center ideas about trust-busting for example or certain labor issues and other things.

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“You can look at the whole world, you can look at things happening in Europe or in the Middle East, anywhere, and see that there are social transformations, political transformations taking place all around the globe, and that includes in America.

“I think this is a moment of kind of ‘wet cement’ throughout the political spectrum and this is a time for new building. Again, it’s time for building based on lessons that have been learned over decades of successful conservative philanthropy. But you don’t continue to be successful just by continuing to do exactly the same things you were doing before that led you to a point where you got very surprised by outcomes.”

—         “A conversation with Modern Age’s Daniel McCarthy (Part 1 of 2),” October 11, 2024, and “A conversation with Modern Age’s Daniel McCarthy (Part 2 of 2),” October 12, 2024

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Foundations’ Comfortability and Philanthropic Reform

“[F]oundations are a little bit uneasy about funding movements. What happens is, foundations are much more comfortable—program officers, with a few exceptions—finding people who are socioeconomically and professionally just like them. So you end up with a jillion Washington-based groups of nicely paid professionals who speak a good game in terms of liberal objectives, many of whom couldn’t organize their way out of a two-car funeral. And that’s the problem. …”

It is “good to see philanthropic money going into voter registration. The essence of a democracy is that we need people to vote. … Expanding the universe of people who can vote is a good thing,” though “I think there’s some clean-up that needs to be done around the edges so that you don’t have explicitly partisan abuses of this process.

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With donor-advised funds and the money donated to them, “[a]s I understand it, you can find loopholes to avoid giving away a lot of it. So that’s an area where it seems to me there ought to be a common concern among progressives, among conservatives, that this is not abused.” Another problem is that DAFs “are increasingly big business for Wall Street.” There “used to be a few freelancers who were good at advising wealthy people on where to put their money. Now, this has become a new profit center” for the big money-management firms.

Overall, “I think the pushback against donor-advised funds is a very good thing, and I think maybe we can get some convergence on that. And I think in principle, although the devil is in the details, it’s possible to get some convergence on what sort of voter registration is legitimately nonpartisan—but when you get into the weeds, it gets really tricky.”

—         “A conversation with The American Prospect’s Robert Kuttner (Part 1 of 2),” October 15, 2024, and “A conversation with The American Prospect’s Robert Kuttner (Part 2 of 2),” October 16, 2024

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Natural and Positive Law, Exemption and Reform

Specific legal categories in the nonprofit sector “enter into our law within historical time.” They “didn’t just drop from Heaven one day. This was created in our law for very particular reasons, which means it could be taken away.

“All of this is downstream of decisions that were made by political leaders within the democratic process within given time. There’s nothing intrinsically magical about the way our law has developed. This is not natural-law stuff. This is positive law and we can change positive law.

From the conservative point of view, “there’s ample reason to be concerned about the fact that a lot of progressive organizations have been incredibly well-funded for a long time. To a certain extent, there’s that kind of détente issue, where we don’t want to tamper with something that is allowing our limited cash flows on the conservative-movement side to continue to flow, to potentially counterbalance” all of that which the larger liberal philanthropies are funding.

As conservatives, “We have baptized kind of an account of what philanthropy can and must be that leaves these bigger or structural questions unexamined.

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“We have a natural right to act with charity, but do we have a natural right to tax exemption? Absolutely not.” There are “two different levels of discourse,” one of “which is what we are as human beings and our natural rights” and the other one of which is those rights “that are very clearly established by the law and conditioned and bounded by certain requirements.”

In nonprofit tax law, “we have these categories of exemptions because we recognize that charitable giving … serves the public good, so if our philanthropic system is not achieving that, then it’s perfectly reasonable to talk about reforming it, I think.”

—         “A conversation with John Ehrett (Part 1 of 2),” October 21, 2024, and “A conversation with John Ehrett (Part 2 of 2),”October 22, 2024

This article first appeared in the Giving Review on December 20, 2024.

Source: https://capitalresearch.org/article/thoughts-on-philanthropy-from-the-giving-reviews-conversations-in-second-half-of-2024/