I am pleased that I get to share my thoughts about philanthropy writ large with you on the last Tuesday of each month. Not to worry…this is not my last Tuesday Letter, nor the letter from last Tuesday, but simply the last Last Tuesday Letter of 2021. What a challenging year it has been, particularly for those most vulnerable. Among the few bright spots of the year is the role played by essential workers in our caring economy at hospitals, pharmacies, grocery stores and hospices. It is difficult to thank them enough.
It’s scary to think about the challenges we have to look forward to next year, not only the pandemic but dealing with the crazies: the plutocrazies, anti-democrazies, and the autocrazies. We must pass voting rights and some version of Build Back Better soon, but ultimately our future rests on this November’s elections.
Any question about whether we already live in a plutocratic society was answered by Congress’ work on the Build Back Better Act (BBB). More than 70% of the public favor having the wealthy pay more in taxes, yet big money prevailed once again in preventing it. In one particular week the Democrats announced that they were dropping any attempt to tax the accumulated wealth of rich people (or at least billionaires) and instead were increasing a tax break for them by raising the State and Local Tax (SALT) deduction ceiling. I thought I was having a bad dream.
We heard people like Elon Musk and Senator Joe Manchin doublespeak that we can’t fund essential programs for poor and middle-income families-programs that take children out of poverty and make childcare and early childhood education affordable–because it would increase the deficit. If Manchin was willing to make Musk and his fellow billionaires pay their fair share of taxes, there would be more than enough money to fund Biden’s entire social investment program. While tempting, It is absurd to blame the failure to pass these essential tax and spend policies just on the Democrats, or even on Senators Manchin or Sinema, when not one single Republican was willing to put the country ahead of their drive for personal power. Nonetheless, at the end of the day, the BBB became the DDD (Democrats Didn’t Deliver), which just makes the CCC–and its drive to get philanthropists to step up to the plate–that much more compelling.
The good news is that thanks to exploding investment gains once again this year, being able to afford to address these challenging issues has never been easier for philanthropists. This is why it was so disheartening to read this headline in this article by Alex Daniels in the Chronicle of Philanthropy (CoP):“As Foundation Assets Grow Fast, Some Grant Makers Are Giving Much More.” Much?? According to the article, foundations with assets greater than $500 million made north of 13% this year yet increased their giving by only 1% of their endowments! For example, the Hewlett Foundation’s endowment went from $11 billion to $13 billion but increased its giving by a meager $150 million. The Packard Foundation made over $1 billion but increased its giving by only $100 million. These numbers barely nudge their overall 5% payout rates these foundations cling to (and even those low rates also include foundation expenses). What do they plan to do with the rest of those hard-earned profits?
These extraordinary gains were not just for 2021, but virtually every year for the last ten years! How does a foundation–even one that drinks the perpetuity Kool-Aid–argue against a 3-year 10% payout suggested by the Emergency Charitable Stimulus proposal when they’ve been earning north of 10% for a decade?
Our tax laws–by taxing capital gains at preferred rates and only when realized–subsidize the hoarding of wealth by people like Musk and his ilk. Did Congress really intend–through generous charitable tax deductions and virtually tax-free investment income for foundations –to support private foundation hoarding as well? Rules for getting philanthropic dollars actually out to nonprofits need an update.
It’s somewhat ironic that frequently the wealthiest among us, whether it be private foundations or individuals, have the most difficulty being truly generous. The CoP article mentions the relatively small Prentice Foundation, with beginning of year assets of about $30 million. it was already giving in the range of 6-8% but increased their grants budget by $1 million after a $10 million gain this year which actually raised their overall payout rate. As John Powers, president of the board, said, “If we don’t give more away now, we’ll have a much bigger mess to try to deal with later.”
While most of my foundations’ 100-plus grantees tried to put some positive spin in their annual roundups, the fact of the matter is we continue to lose the battles against climate change, voter suppression, gun safety, healthcare, poverty, homelessness, wealth inequality and more.
Given the multiple crises we’re facing, wealthy philanthropists might take note of Powers’ comment and make one of this one of their new year’s resolutions, “Give Much More Now.” Let’s make hoarding the ghost of Christmas past. It couldn’t be easier, more necessary and even more rewarding. Please have a fulfilling holiday season, stay safe, and many thanks for caring.