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Thoughts on philanthropy from The Giving Review’s “Conversations” in first half of 2024

Jul 19, 2024

A mid-year collection of interesting and insightful thinking about grantmaking and giving.

Higher-ed endowments and taxes

“The magnitudes of some of these endowments has gotten so large that it becomes a question of public policy because there are tax advantages that donors receive in order to give to universities. … [G]etting special public treatment by the tax [code], in a sense, it is a subsidy. And so the question is, Well, why should we subsidize Harvard University when we have poor people who deserve it more than the people that go to Harvard? I mean, this is an argument, an equity argument, that some people will use and it has some validity to it.

“[T]he political dynamic has changed, the political calculus has changed, and so there are congressmen who 10 years ago, 20 years ago, would’ve been dead set against an endowment tax are now in favor of it.”

Milton Friedman “certainly didn’t have the advantage, maybe disadvantage, of knowing all that has happened since” the early 2000s. He “would be very concerned about higher ed and he would favor some sort of taxation of universities, whether an endowment tax or not. I’m not sure that would be the way he would go, but I think there’s a chance he would be in favor of a big endowment tax.

“As one who’s taught at both expensive private schools with big endowments and small public schools with poor endowments, I can see how endowments could lead to some laziness, some lack of attention to” detail.

—         “A conversation with economist and historian Richard Vedder (Part 2 of 2),” January 11, 2024

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More on taxes, politics, and charitable nonprofits

There is “a pretty compelling case that” the nonprofit sector is “just an unregulated area with a lot of money sloshing around in a very tax-favored” environment—“and actually not just in terms of the federal income-tax deduction, but also to other state deductions and other benefits that nonprofits get—to no particular public purpose, and I think that’s probably right.

“I think probably until after World War II,” nonprofits were almost exclusively aimed at “serving the needy or as churches and things like that—which have a not necessarily compelling, but widely accepted argument that they should be tax-exempt for First Amendment reasons. But it’s like a huge explosion in the post-war era, and especially over the last two or three decades, of nonprofit entities that are fundamentally political in nature, really.

“It’s kind of problematic to have” the Internal Revenue Service “start really scrutinizing these things that closely. First, the job’s too big … and they can’t be trusted. So a simpler way of doing it would be to simply say” that those nonprofit organizations that are not “in the business of operating hospitals and orphanages and things like that can continue to operate, but no longer under special, advantaged nonprofit status. If you think it’s worth donating money to them, then you have to pay tax on that money before you donate it to them—just like you’d have to pay tax of the money before you gave it to me. 

“By the way, anybody … who wants to give money to me is encouraged to do so. I’m not against donations, but I will say that there’s no particular reason why somebody donating money to me should be able to deduct” it from their taxes. “I think for most nonprofits, it’s kind of the same thing.”

—         “A conversation with University of Tennessee law professor Glenn Harlan Reynolds (Part 1 of 2),” February 19, 2024

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Compass and moral purpose, meaning and dignity

“There’s a lesson in this for contemporary Americans. Can we disagree without hating each other?

“The genius of the philanthropy that the two philanthropic brothers, Arthur and Lewis, took up” is its basis in a belief that “man is not defined by bread alone. They did not believe in just giving people things. They didn’t believe that was the main thing that was missing.”

They believed “the main thing that’s missing in unhappy lives is a compass, a sense of moral purpose, a sense of meaning and dignity. So that’s where they put their emphasis. A lot of what they did was really aimed at building character and competence in poor and struggling and unhappy people, rather than giving them stuff. It really was so radically different than so much of what we see today. The word ‘moral’ almost has this negative connotation today.”

But Arthur and Lewis Tappan “thought that that you if you weren’t pursuing moral ends when you’re trying to help people, you very soon either become a lord of the manor who thought too much of himself or you would condescend to other people, or you face other temptations. They really felt like this is something you do because your faith calls you to it you do it, as an equal with the other person. … You’re not better just because you’re the giver.”

—         “A conversation with The Brothers author Karl Zinsmeister (Part 1 of 2),” March 11, 2024

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Funders’ influence over nonprofit news

Funders of nonprofit news “ actually have far less influence than the owners of for-profit publications” Grantmakers to nonprofit news are “more in the position of advertisers.” For instance, at The Wall Street Journal “these days, I strongly suspect that Rupert Murdoch does occasionally know what’s going to be published before it’s published. I don’t think, though, that the advertisers at the Journal ever do. The donors at a place like ProPublica have been put in the category, in terms of their ability to influence things, in the category of advertisers rather than owners.

In fact, “A lot of the money for nonprofit journalism comes from readers. You are, I think, effectively dependent on your readers in ways … that people have not yet fully come to grips with.” Realistically, the more-concerning question is “how much editors may be willing to discomfort their readers than how much they are willing to discomfort their donors or their advertisers.”

         “A conversation with Second Rough Draft’s Richard J. Tofel (Part 2 of 2),” April 16, 2024

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“Thank you”

Donor-advised funds (DAFs) “are warehouses for charitable money. There’s no requirement that DAFs ever get the money out the door. … [T]he money can sit there. And some of the institutions that are the sponsors, well, they have a vested financial interest in the money staying there and they continue taking fees.

“Sometimes, I’ve talked to journalists” about these issues, and “they say, ‘Could we hear it from a nonprofit leader?’” The answer is, “Well, I need to find somebody who’s retiring next week and dying next month.”

“We are beholden. We, the nonprofit community, don’t want to alienate our donors, and many of them feel like if you criticize, then you’re impugning their reputation, and they’re very sensitive. You also don’t want to alienate the local community foundation, often the largest funder in the area, and their bread and butter is donor-advised funds.

“Nonprofit leaders do not talk about these things, so I feel like I can say it for them. … [M]ost of them really appreciate it. They come up to me at conferences and whisper in my ear, ‘Thank you.’”

         “A conversation with nonprofit consultant Alan Cantor (Part 1 of 2),” April 22, 2024