President and CEO of Philanthropy Roundtable Elise Westhoff recently submitted testimony to the Generosity Commission ahead of its final report set to be released in early 2024. The commission is a nonpartisan group of individuals from across the charitable sector whose mission is “to celebrate and support American’s spirit of generosity as expressed through giving, volunteering and civic engagement.” The Generosity Commission launched in 2021 as an independent project of Giving USA Foundation to “advance research, education and public understanding of philanthropy.”
Westhoff’s testimony covers recent trends in charitable giving as well as the challenges and opportunities facing the philanthropic sector. From highlighting how philanthropic freedom fuels American generosity to addressing troubling attacks on charitable givers, her testimony celebrates the diversity and innovation of the American philanthropic tradition that has improved lives and strengthened communities for hundreds of years.
Below is the second installment in a three-part series based on written testimony prepared for the Generosity Commission. To read part one, click here. To read part three, click here.
Jack Salmon, director of policy research at Philanthropy Roundtable, contributed to this testimony.
PART TWO: Philanthropic Freedom Fuels American Giving and Volunteering
Driving the Decline
Charitable organizations continue to face several challenges that may negatively impact the generous spirit of Americans. A healthy U.S. economy with robust rates of growth is what ultimately drives increases in the level of disposable income in society and, in turn, provides donors with more resources to give to charitable causes. However, the recent rise in populist rhetoric and policy proposals undermines the economic dynamism that drives charitable giving. Growing criticism of wealth creators and policy proposals that target successful Americans could inhibit the generosity of these Americans and limit the tools available to support charitable causes.
More than this, negative rhetoric toward successful entrepreneurial behavior could discourage others from engaging in such pursuits, reducing the size of the economic pie and subsequently chilling charitable giving. To make matters worse, the current administration is proposing a plethora of new taxes on hardworking Americans that would stifle innovation and hamper the freedom and ability of Americans to donate generously to the charities of their choice.
Threats to Donor Privacy
Policymakers in several states have introduced legislation that would erode donor privacy, expose donors to harassment and disincentivize charitable giving. Within our highly polarized and divided society today, donor privacy remains a vital component of philanthropic freedom. This right has been foundational in the American advancement of a multitude of important causes throughout our history from abolitionism and women’s suffrage to the civil rights movement. Undermining the right of Americans to give freely and anonymously is a sure-fire way to dull the civic engagement that drives progress and discourage the generous charitable giving that empowers local and community leaders.
The right to give freely and anonymously has been critical to the advancement of civil rights in America. For example, in 1958 the governor of Alabama ordered the NAACP to reveal the identities of its members and donors. The U.S. Supreme Court ruled unanimously that Alabama could not force the NAACP to disclose this information, as to do so would infringe on core First Amendment rights by exposing members and donors to “economic reprisal, loss of employment, threat of physical coercion and other manifestations of public hostility.”
The importance of donor privacy is an issue that crosses party lines. For example, donors to the right-leaning Americans for Prosperity Foundation faced death threats after California forced the organization to disclose donor information. Organizations that filed amicus briefs in support of the foundation included left-leaning groups such as the American Civil Liberties Union, the NAACP Legal Defense and Education Fund, and the Human Rights Campaign. And in 2021, the U.S. Supreme Court reaffirmed that donor privacy is protected by our constitutional right to freely associate in the court’s ruling in Americans for Prosperity Foundation v. Bonta:
“This court has ‘long understood as implicit in the right to engage in activities protected by the First Amendment a corresponding right to associate with others.’ Protected association furthers ‘a wide variety of political, social, economic, educational, religious and cultural ends,’ and ‘is especially important in preserving political and cultural diversity and in shielding dissident expression from suppression by the majority.'”
Unfortunately, this threat to charitable giving continues as donor disclosure efforts are spreading at the state level. It’s clear that donor anonymity is as important as ever as a foundational pillar of civil society and philanthropic freedom.
Proposed Restrictions on Giving Pathways
In recent years, we have also seen growing calls for heavier regulatory burdens on flexible charitable giving vehicles that have allowed the philanthropic community to respond quickly to crises. For example, donor-advised funds (DAFs) have been useful tools for democratizing philanthropy and enabling donors of all financial means to increase their giving capacity over time.
During the COVID-19 pandemic in 2020, DAF grants exceeded $30 billion for the first time, according to a report from the National Philanthropic Trust (NPT), allowing charitable funds to reach communities in times of most need. And this trend continues as NPT reported late last year that DAF grants to charities reached $45.74 billion in 2021. According to NPT, this is part of a larger trend: “Grants from DAFs to qualified charities increased more than 60% in the past two years, accelerating an upward 10-year trajectory.”
Yet, critics of donor-advised funds risk hindering the vibrant function of these popular and flexible charitable vehicles that democratize giving by calling for arbitrary payout mandates, timelines and other restraints that risk raising barriers to accessibility for many Americans.
Negative “Us vs. Them” Narrative
Underpinning charitable organizations, donors and volunteers is the trust Americans have in philanthropic institutions—a vital pillar of civil society. In recent years, we have witnessed a shift in negative rhetoric regarding philanthropy—a shift that has been highlighted by the rise of recent populist attacks on philanthropy. For example, Sen. J.D. Vance (R-OH) has said that charitable foundations and college endowments are “cancers on American society” and has argued for seizing the assets of charitable foundations.
From policymakers advocating for the seizure of private nonprofit funds whose missions they disagree with to academic critiques decrying the growth of charitable organizations as a threat to the democratic expectations of the political equality of citizens, it’s important for us all to remember that expanding the size and reach of government regulation of the charitable sector will hurt those who rely on charity—the most vulnerable in our communities.
These attacks on the charitable sector are also dangerous because they undermine the very trust that motivates Americans to engage in philanthropic activity. In 2022, 56% of Americans said they trusted nonprofits, “down a statistically significant 3 percentage points from 2020 (59%),” and trust in philanthropy edged down from 36% to 34% over the same period, according to Independent Sector’s most recent “Trust in Civil Society” report.
Declining trust in philanthropic institutions undermines the generosity of Americans who donate their time and money toward advancing the charitable causes they are most passionate about. Levels of trust in a society can have various nuances that highlight significant social challenges, emphasizing the urgency for civil society to address growing cultural divides. For example, in the Give.org Donor Trust Report 2021, there are significant differences in how trust levels change by category of charity, which argue that cultural shifts and social discussions are moving the needle.
According to the Give.org report, “Between December 2017 and December 2020, religious organizations and police and firefighter organizations saw a steady drop in the portion of people who highly trusted them (7.4 and 5.5 points respectively). Civil rights and community action organizations experienced a significant (12.3-point) drop between December 2017 and December 2019, but then saw a noteworthy (3.4-point) upward turn between December 2019 and December 2020. Environmental organizations experienced a 3-point increase in ‘high trust’ within 2020.”
The report dives deeper into the demographic differences as well and finds takeaways like, “Gen Z participants trust religious organizations much less than they do other charity types.” And, “Among people who report donating more than $5,000, and among boomers and matures, participants are less likely to say they highly trust environmental organizations as compared to other charity categories.”
This piece is the second installment in a three-part series based on written testimony prepared for the Generosity Commission. To read part one, click here. To read part three, click here.