*An updated version of this post now appears on Care2 Causes where you can take a poll on whether the wealthy should pay more taxes or give more donations.
I am the Founder and Executive Director of a nonprofit organization called Exhale. As the leader, I spend the vast majority of my time raising money. Exhale receives no government funding and we earn our revenue primarily through foundation grants and the generous contributions of individual donors.
Because I am a professional fundraiser and nonprofit leader, you might assume that the idea of America’s most well-known billionaires – Bill Gates and Warren Buffett – hatching a well-marketed plan to get other members of their elite club to give away half of their money to charity would get me excited. You might think that I should spend all my time trying to figure out how to get my hands on it.
You would be wrong.
The truth is, for those of who have built our entire professional careers in the nonprofit sector, we know some secrets about philanthropy and giving that the rest of the world does not. We know, for example, that the vast majority of money that is contributed to nonprofit organizations in the United States doesn’t come from the rich. It comes from the poor. We also know that foundations are not the primary source of funding to our sector. People are. Poor people.
As Stacy Palmer from the Chronicle of Philanthropy said in the AP article by Donna Gordon Blankinship “the bulk of money raised by charities today comes from non-billionaires giving $5, $10 or $50 at a time.” Palmer followed up with a reality check about the giving patterns of rich people: “only 17 people on the Forbes list of the 400 wealthiest people in America are also on the Chronicle’s list of the most generous American donors.”
The main reason our sector (the great, big diverse sector of organizations that hold the tax-designation of 501(c)3) even exists is because several decades ago, a few wealthy Americans found a way to create tax shelters for their wealth within the domestic United States. They started private, philanthropic foundations. These foundations allowed the wealthy to keep their money out of the public domain where democratically elected representatives would decide how best to spend it. They found a way – and created the laws and tax codes to protect it – to keep for themselves what was legally owed to the rest of us.
Let’s get specific. This means, for example, that instead of paying a million dollars in taxes, a wealthy philanthropist puts his million into his own personal foundation, and by the very laws he helped to create, he is legally only required to “give” a very small percentage – about 5%- of his foundation’s assets to charity every year. Meanwhile, within the shelter of this foundation, he is allowed to forever grow his fortune without taxation.
The consequence of this is that what was supposed to be a million dollars contributed to the public domain through taxes is now just $50,000 only available through charitable contributions. What could have been a million dollars spent towards elementary education is now just $50,000 for a park bench at his alma-mater. What could have been a million dollars to help take care of our elderly is now $50,000 to sponsor a cocktail party at his favorite museum.
Just because wealthy philanthropists have starved the government of revenue doesn’t mean that the things governments have always paid for have gotten cheaper or are no longer needed. Like all of us, we need more than ever to be healthy, educated, and safe, and everything we need costs more than it did before. Except now the government has less money to fulfill its obligations.
And so the nonprofit sector grows in response.
But – surprise! – nonprofit organizations are not here to pick up the slack of governments or corporations. Despite what you may think, nonprofits are not a tool designed to meet the massive human and civil needs that don’t go away just because our government can no longer afford to pay for them. No amount of car washes, bake sales, Facebook Causes or charitable gifts from the rich can address the government’s revenue gap fueled by the wealthiest Americans sheltering their billions.
Nonprofits, as advocates for the public good (this is not flowery, self-congratulatory language, this is our actual tax status), we have a history of stepping in, filling the void and upholding the responsibility that was once the governments. Even worse, we compete with each other over the $50,000 chump change, wear our sacrifice like a badge-of-honor and accept that the public good is only worth the spare change others are willing to contribute when they feel like it.
We all pay the costs of a system which privileges billionaire elites. We pay the cost when parents and communities have to not only pay their own taxes, they also have to start their own nonprofits, donate their own money and spend their time raising money from others in order to fund their children’s schools. Or pay for their cousin’s cancer treatment. Or maintain a local park.
As leaders of nonprofit organizations we should not settle for a role as the stop-gap. Instead, we must lead our organizations to band together and demand the true costs of what we need to fulfill our missions and hold the government – and the wealthy – accountable to their responsibilities for the public good.
Through charitable giving, wealthy philanthropists starve the government of revenue. And then they expect us – nonprofit organizations – to beg and compete for their pennies. We must all say no.
Instead of a Giving-Pledge, I encourage Gates and Buffett to use their leadership and their wealth to start a Tax-Pledge. They should ask their fellow billionaires to pay their fair share.