The Wall Street Journal on January 8, 2020 in an opinion piece entitled “The War on Philanthropy:  Private giving achieves what government can’t—which is why authoritarians hate it” basically provides an unabashed defence of philanthropy and response to those who criticize philanthropy for advancing more the interests of billionaires than the public interest.  It notes:

Rather than being an instrument of plutocracy, America’s highly decentralized philanthropy is one of its most pluralistic and democratic elements. Philanthropy disperses authority, gives individuals direct opportunities to change their communities, and lets nonmainstream alternatives have their day in the sun.

Giving “individuals direct opportunities to change their communities” can be a change for the good or bad depending on whether you share the views of the philanthropist.  Some philanthropists have worked hard to help immigrants to this country settle and adapt to Canada while other philanthropists around the world have worked hard to prevent immigration.   Allowing “nonmainstream alternatives have their day in the sun” again can be a good thing or a bad thing – there are non-mainstream views which may be repugnant to many.

In my view, there is no “war” on philanthropy.  There have been many commentators over the last few years raising concerns about growing inequality of wealth and also how charities and foundations operate with large tax incentives for those who donate and in some cases very little transparency and accountability.    There is also nothing new about these criticisms.

Here is an article dug up Rhodri Davies in the UK from 1974 which expresses many similar concerns in this case about foundations.

 

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If philanthropist want effusive praise as is enjoyed by the Supreme Leader of North Korea they perhaps should think about moving to North Korea.  There are many reasons why in a democratic country like Canada people will sometimes praise the work of philanthropist and some times criticize.

There are large tax incentives for donating to charity.  Every dollar “saved” by a taxpayer in donating means that the various levels of government have less funds to provide vital services.   Even Bill Gates has expressed a concern that taxes should be higher and that government services need to be increased.   See this recent article in the Financial Post “Bill Gates, whose fortune stands at $113 billion, is pushing for higher taxes on the rich”  It would have been nice if some time between him only having say $10 billion and $50 billion he would have expressed this view and also put money behind making sure it actually happened.  You see it is popular to say we need a fair tax system, reduction in tax secrecy jurisdictions etc – but it is hard work to actually make that happen – especially when there are some very concerted interest groups that want very low taxes on the super-wealthy.   Warren Buffet has on many occasions expressed concern that he pays a lower percentage of taxes than his housekeeper.   Unfortunately just expressing the concern does not solve the problem. As long as the amount of subsidy provided to philanthropists is as high then there will be those who question whether the motives of philanthropists are relatively altruistic or more related to tax savings, recognition and control of an important issue or topic in society.

A US Professor Megan Tompkins-Stange recently tweeted “Let’s be clear: There is no war on philanthropy. There is, for the 1st time in 50 years, a mainstream critique of elite donors’ privileged position in society. There’s a robust discussion of the economic systems that enable this. No one is coming for philanthropy.”

I agree with her that the critiques/criticisms of philanthropy have become more mainstream over the last few years and to be frank with the resources involved, the important areas of society touched, the lack accountability and in some case transparency of philanthropists, it is probably a good thing that there is now a more serious discussion of the topic. What I would half-heartedly disagree with is the statement “No one is coming for philanthropy”.   In fact now with 90% of donors in the US receiving no tax benefit for donating to charity – I think that there are many people “coming for philanthropy”.   If no one was coming for philanthropy Trump’s tax changes may have been implemented differently.  There are people on the right who would rather there are lower taxes for all rich people rather than lower taxes for donors.  There are people on the left who think that government programs are more democratic (we have elections at least), more sustainable and able to deal with bigger problems.   Some on the left view philanthropy as a distraction, a hole in the ability of government to gain revenue necessary to deal with important societal issues or even worse – rich people controlling society through undemocratic means.   Then there are the 10-30% of people (from right to left) who don’t trust charities at all (in some cases I am not sure if they even know what a charity is) but perhaps one day we should ask why do so many people not trust charities and perhaps in some cases charities should improve.

But I also think that philanthropists and the charitable sector, instead of being blase about these critiques and criticisms, need to be aware of them, understand them and in some cases operate differently.   When someone sets up a $750 million perpetual endowment to prevent climate change – which results in a huge tax benefit to the donor  – is it not fair to ask, if one believes that climate change is real and immediate, why funds are being kept back for tens of thousands of years when in theory we would not even have a planet in 50 or a hundred years? Simply put some things very wealthy people do – including in the realm of philanthropy – are really really stupid.   Few charities receiving funds want to be the ones to say it to their faces – and other charities hoping to receive funds are equally reticent to engage in a proper critique of the philanthropist’s actions.

Those who unabashedly defend philanthropy are doing philanthropy no service. Those who think that they can subtly criticize philanthropy and that others who criticize philanthropy don’t understand anything are also not very helpful. While philanthropy can accomplish wonderful things – it can also result in the rehabilitation of really bad people’s reputation, the control of important areas of society disproportionately being provided to in some cases some very bad people, not to mention huge tax incentives mentioned above.    If MIT can get sucked up in these problems, almost any charity is vulnerable.  If you are aware and vigilant you have more of an opportunity to appropriately respond.

Philanthropy can be defined in many ways including the use of private resources for public purposes.  However, it gets cloudy when in fact most of the resources being used by some HNW individuals are actually public resources and sometimes the purposes are not so much for the “public” benefit. In Canada, many HNW individuals can donate to a foundation and the public is putting in 2/3 of the funds through tax benefits and the donor is only putting in 1/3. Those in favour of the incentives for donations of publicly listed securities see absolutely nothing wrong with this.  However, these high tax incentives are combined with a sometimes a lax charity system with poor governance, limited accountability, a failure to comply with rules then it is not hard to see some who question whether society is actually getting a good deal from philanthropy.   After all, some people are very generous and spend their whole lives volunteering with charities or even just doing it as an individual and they get zero tax benefit and if they are lucky at some point they may receive an 8.5 x 11 paper award for being an ‘exemplary volunteer’.   Clearly some generosity is treated more generously than others.

A lot of the criticisms of philanthropy are very avoidable and a lot of it has to do with not just following the law, but going beyond legal requirements.  The disbursement quota requires in Canada that a foundation (or other charity) disburse 3.5% of the average value of your assets not used in charitable or administrative activities every year.   When a donor receives 100 percent of the tax benefit immediately when they donate to a charity or their private foundation, few are going to think that spending 3.5% of the 100% is being generous! There is a simple solution – give more – especially if you say that you care about pressing issues such as poverty, human rights, climate change, etc.   Also yes you can use DAFs and other tools to hide your giving but really is it a good idea?  Being transparent when you are a charity is important – especially if you are touching on sensitive areas of society.   Try to avoid involving “ineligible individuals” and others that have abused charities or have fraud convictions etc in your charitable work.   All because you don’t know that they are a problematic person – does not mean that others will not know.  While legal compliance is very important it is even more important to think of the society you live in, ethics, and protecting your reputation.   Instead of just worrying about a CRA audit, also worry about a call from Kevin Donovan at the Toronto Star.

So, in summary, there is no war on philanthropy – but perhaps it would be a good thing if people who are involved with philanthropy are worried a little bit that there could be a war against philanthropy and they really need to be more aware of how different stakeholders can view different actions in different contexts in different ways.