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Introduction

The mission of The Philanthropy Roundtable is to foster excellence in philanthropy, protect philanthropic freedom, and help donors advance liberty, opportunity, and personal responsibility. This briefing focuses on philanthropic freedom—what it means and why it matters.

Philanthropic freedom is

1) the individual or organization’s freedom to exercise human generosity by making voluntary charitable donations for the sake of the well-being and improvement of society, broadly understood, as well as

2) the individual or organization's freedom from restriction or coercion in the exercise of such generosity.

The Philanthropy Roundtable endeavors to protect both aspects of philanthropic freedom, supporting donors’ ability to voluntarily donate their private funds how and where they like. We recognize that the voluntary nature of charitable giving lies at the heart of this nation’s philanthropic tradition and is an essential prerequisite for continued generosity. Philanthropic freedom gives us the creative diversity of interests and approaches that has characterized centuries of American charity, resulting in a vibrant civil society. 

The roots of philanthropic freedom can be found in common law’s core principles concerning private property, i.e., the right to acquire, possess and dispose of one’s assets. Those roots were strengthened in written law and further nurtured by the First Amendment freedoms enshrined in the American Constitution. Donors exercise their rights to freedom of expression, assembly, and religion when they engage in private charitable giving.

Philanthropic freedom, however, is not universally recognized, and criticisms of private philanthropy are nothing new. There was considerable antagonism in the late nineteenth and early twentieth centuries toward the great wealth amassed by men like Andrew Carnegie and John D. Rockefeller, and also toward their plans to protect and direct that wealth through private foundations. “Money made through the labor of others is not theirs to give away” was a common refrain of progressive elites and of workers and their unions. During the hearings of the Commission on Industrial Relations held from 1912 to 1915, private foundations were characterized, in the testimony of Rev. John Haynes Holmes of the New York Church of the Messiah (and later board chairman of the American Civil Liberties Union), as “essentially repugnant to the whole idea of a democratic society.” Commission Chairman Frank P. Walsh, a Kansas City labor lawyer, called big foundations “a menace to the welfare of society” and asked whether it would not be better to tax “all large incomes to pay for a scheme of accident, health, and old-age insurance."

The development of tax law around nonprofit organizations has also contributed to arguments against private philanthropy. Charitable tax exemption was firmly established in federal law in 1909, and the charitable deduction in 1917. This has led philanthropy critics like National Committee for Responsive Philanthropy President and CEO Aaron Dorfman and others to suggest that philanthropic assets are—at least in part—“public money” because they receive government “subsidies” in the form of tax deductions and exemptions. They are wrong. Such tax provisions are not subsidies, but rather protections that insulate private giving from government control (though not from reasonable regulation). Evelyn Brody and John Tyler recognized this in The Philanthropy Roundtable’s 2012 publication, How Public is Private Philanthropy?, noting that “with the charitable deduction, the donor, not the government, decides whether to give at all, in what amounts and forms, to which qualified charities, and whether any designations or restrictions accompany the contributions.”  

Contemporary critics also echo many of the earlier complaints, arguing that private philanthropy is, by nature, anti-democratic and little more than a convenient and tax-free vehicle to “mask” and “sanitize” the sources of wealth. Society would benefit, they claim, if charitable assets were instead paid in taxes because elected officials would be more likely to direct those resources to our most critical problems. Advocates of this sort of state-controlled centralization ignore what is truly democratic—a pluralistic system in which citizens are free to make decisions about the health and well-being of an independent civil society, and equally free to take voluntary action in that sphere.

No matter where their arguments begin, the opponents of philanthropic freedom inevitably end up in the same place—calling for new rules and regulations that will limit or destroy your ability to decide where to give and how to give.