Philanthropy in America
The United States is more than a government and its citizens; it is a society defined by a deep tradition of voluntary association. The constitutional guarantee of freedom of association allows Americans to organize around shared interests, values, and missions, forming the foundation of the nation’s charitable and nonprofit sector. Today, roughly 1.8 million nonprofit organizations operate across the country, embedded in communities of every size and character (Salmon and Tanner 2024). These organizations reflect the pluralism of American society and illustrate how social cooperation can emerge organically. With better understanding of how state policy environments shape the ability of these organizations to form and operate, we can better understand the keys to a healthy and vibrant civil society.
Charitable and nonprofit organizations play a vital role in addressing social needs that transcend age, income, race, and geography. They provide food for the hungry, shelter for the homeless, medical care for the sick, and educational opportunities for individuals and families seeking a better future. They offer sanctuary for battered women and recovery for those suffering from addiction.
From dense urban neighborhoods to rural and remote communities, charities foster civic engagement, develop local leadership, and strengthen social bonds. Their effectiveness often depends on the regulatory and legal environment in which they operate, making cross-state differences especially relevant for understanding why some states sustain more vibrant nonprofit sectors than others.
This dynamic civil society has long been recognized as a defining feature of American political economy. Nearly 200 years ago, Tocqueville observed that “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.” (Tocqueville 1835).
Through voluntary organizations, citizens express their priorities, mobilize resources, and advance social movements. Private charities championed the abolition of slavery and women’s suffrage and helped communities recovery from disasters like Hurricane Katrina and COVID-19 (Storr et al. 2015). These historical examples underscore that philanthropy and voluntary action are not peripheral to American life, but central mechanisms through which social problems are identified and addressed.
A robust and independent charitable sector also complements limited government by filling gaps that neither public institutions nor market institutions can adequately fill (Cornuelle 1965). Local, voluntary organizations often have better knowledge of local conditions and are more alert to the needs of their communities than are governments (Chamlee-Wright and Storr 2010). They are frequently more nimble and locally responsive than government agencies, allowing them to experiment, innovate, and tailor services to specific community needs. And when there is some degree of competition between charitable organizations, that rivalry tends to encourage efficiency, permitting philanthropic dollars to do more good (Harrison and Thornton 2022).
Incentives Matter, Even in Philanthropy
Strong though it may be, the urge to give is also rational. Like all other human actions, the philanthropic drive responds to carrots and sticks. When governments make it harder to generate the private capital that fuels philanthropy, when it makes it more difficult to form or run philanthropic organizations, or when it disincentivizes giving, then rational people will be less philanthropic, and philanthropic entrepreneurs will be less active. Similarly, when governments create the conditions for economic flourishing, make it straightforward and inexpensive to start and run philanthropic organizations, and allow donors to give freely and privately, then philanthropy will thrive.
A large body of research suggests that institutions—that is, the rules of society—affect economic behavior (North 1990; North et al. 2009; Acemoglu and Robinson 2012). We know this in part because economists carefully measure these institutions. The annual Economic Freedom of the World index, for example, measures the degree of economic freedom in 165 nations around the world using 46 indicators of policy (Gwartney et al. 2025). It has now been cited more than 14,000 times and used in more than 1,000 peer-reviewed studies to assess the relationship between economic freedom and outcomes of interest. Thanks to this measure we know that more economic freedom tends to go hand-in-hand with better outcomes, including higher and faster-growing income, less poverty, better health, longer life, lower infant mortality, greater life satisfaction, cleaner environments, less violence, greater trust, greater tolerance, more democratic institutions, and more personal freedom (Lawson 2022; Berggren 2024; Mitchell 2024).
Similarly, the state level Economic Freedom of North America has been used in more than 250 independent studies assessing the effect of economic freedom on state and provincial outcomes (Stansel et al. 2025). Here again the evidence suggests that states and provinces that permit their citizens more economic freedom tend to experience better economic and social outcomes, including higher income (Hall et al. 2019), more entrepreneurship (Powell and Weber 2013; Cebula et al. 2020), more in-migration (Shumway and Davis 2016; Cebula 2024), and greater income mobility (Wiseman 2017; Dean and Geloso 2022). Economically freer states also experience less poverty (Dean and Geloso 2024), less homelessness (Cebula and Saunoris 2021), and less food insecurity (Stansel and Wu 2024). People in economically free states are happier (Belasen and Hafer 2012; Jackson 2017). They are more tolerant (Berggren and Nilsson 2013). And of particular relevance to the current study, they are more philanthropic (Jackson and Beaulier 2023).
But while national and state measures of economic freedom are produced on an annual basis, measures of philanthropic policy have been more sporadic (Lott et al. 2016; Winegarden 2023). In this report, we build on these earlier assessments. And we hope that in doing so, we can offer policymakers, academics, and the philanthropists, a helpful tool to evaluate debates about charity policy.
Why Measure Philanthropy Policy?
We have our own opinions about charity policy. As the discussion above suggests, we believe that, on the margin, civil society would be stronger if charities and their donors were permitted more freedom. But reasonable and well-meaning critics can disagree. Some, for example, argue for more state and federal oversight of charities. According to this view, oversight limits fraud and ensures that charities better serve the common good.
But there are tradeoffs. For example, more regulatory barriers to philanthropy and steeper compliance costs might reduce the overall amount of charity. Some may be willing to make that compromise. But we should at least know what it is. A consistent and regular measure of charitable policy will help policymakers and the public make that determination.
More regulatory barriers to philanthropy might also lead to more consolidation in the charitable sector and less charitable competition. Since competition can weed out fraud and waste, regulatory burdens that are intended to ensure honesty and probity might well be self-defeating. But, again, this is an empirical question. And hopefully our measure of charity policy will help address it.
Since charitable donations are generally tax deductible, some argue that charities should be made to serve the public’s interests, as determined by the democratic process. But this, too, has tradeoffs. If government regulators aggressively police the activities of donors and charities, will that further politicize philanthropy? Will liberal philanthropic causes suffer under Republican administrations? And will conservative causes suffer under Democratic rule? Even if it doesn’t become more political, will excessive red tape cause the charitable sector—known for its dynamism and flexibility—to become more like the large public social safety nets that frustrate liberals and conservatives alike? Will the charitable sector become, in effect, another branch of the government?
Again, these are empirical questions that would be well-served by an index that measures differences in charitable policy across time and jurisdiction. Armed with such a measure, analysts can compare outcomes in states with markedly different policies to see if the policies serve their intended goals. Does greater charitable oversight lead to less fraud? To less charity? Or to a political business cycle in the charitable sector? We hope our index can help answer these questions.
Toward a Philanthropic Policy Index
Ours is not the first attempt to measure charity policy. We are particularly indebted to a group of researchers at the Urban Institute who pioneered the practice (Lott et al. 2016; 2018) and to Wayne Winegarden (2023), who continued to refine it. In many cases, we saw no need or means to improve on what they had done. In other cases, we have added additional indicators, such as minimum fees where they had only measured maximums. We have also added measures to account for the broader policy environment since it is not only charity-specific policy that affects the charitable sector. In so doing, we have divided our overall index into three sub-indices: one for broad policy, one for nonprofit freedom, and one for donor confidence. By offering separate measures of each, as well as an overall measure, we hope to clarify the different policy domains that might affect philanthropy. Finally, we introduce a methodology that in future editions will allow us to track policy changes over time.
This index is designed to measure how well states protect and promote charitable activity, recognizing that a flourishing civil society depends not on a single policy lever, but on a broader institutional environment that allows voluntary organizations to thrive. While we recognize that federal tax and regulatory policy affects charitable activity, we focus here on state policy. Because it varies across 50 states, state charity policy offers us a window into the effects of all government policy.
In the next section we describe the index, its subindices, and their components. In section 4 we provide an overview of the results, highlighting those states at the top and bottom of the Free to Give Index as well as those at the top and bottom of the subindices. We also present some simple analyses showing the correlation between charity policy and philanthropic activity. In section 5 we profile each of the 50 states and in section 6, the technical appendix, we provide more details on the methodology.