Punishing Large Foundations Will Harm Civil Society
Political newcomer J.D. Vance made waves in Ohio by winning the Republican primary for that state’s open U.S. Senate seat. Vance has been known in policy circles with his 2016 bestseller, “Hillbilly Elegy,” a memoir on the plight of poor, rural whites in Appalachia. He recently ran a hedge fund in California before returning to his home state to enter politics.
Vance’s brand of populism resonates with many voters, but one area in which his advice is sorely misguided involves private philanthropy. Vance has proposed a tax on the assets of large philanthropies — calling out the Ford Foundation by name — claiming it is “the fair thing to do” because these institutions create “a massive left-wing bias at the heart of our society.” Vance has also suggested requiring foundations with more than $100 million in assets to spend 20% of their endowment each year — or else lose their tax-exempt status.
We have heard this sort of anti-philanthropy sentiment before from various critics left and right of the political spectrum. And once again we urge caution. This line of thinking betrays a lack of knowledge about what our nation’s charitable sector actually looks like and how it functions.
It’s essential that those who seek to kneecap philanthropic generosity on ideological and political grounds remember what goes around comes around. Ill-conceived government mandates will not discriminate — nor should they. Additional regulations will not just burden the foundations politicians or bureaucrats dislike, but all foundations governed by the same rules. Unfortunately, we know from history that large organizations have the resources to navigate these waters, while the smaller organizations are the ones who truly pay the price.
When we focus too much on large foundations that tend to bankroll left-wing causes, we lose sight of all the good being done by individual donors, community foundations and smaller philanthropies. All told, the U.S. boasts around 185,173 foundations, according to the latest data from Cause IQ. Of those, 145,262 are private foundations with 90,247 of that total number having less than $250,000 a year in revenues. These small givers provide a vital lifeline to help people in their communities and enrich and strengthen our nation’s civil society. Without their generosity, we would all be far worse off.
Consider the example of Karen Buchwald Wright, president and CEO of the Ariel Corporation, a gas-compressor manufacturer started by her father. In addition to employing thousands in Knox County, Ohio, Wright has generously reinvigorated the county seat of Mount Vernon, which is now known for its historical downtown, beautiful outdoor spaces and thriving small businesses and eateries. Her family foundation has also invested millions of dollars in community colleges and trade schools and provides scholarships to Knox County students enrolled in four-year engineering colleges.
Other foundations with assets well below $100 million have a huge impact on their towns and cities. In Beloit, Wisconsin, the Hendricks Family Foundation focuses on building a strong and vibrant community by supporting local needs such as education, career pathways and veterans and veteran families. In Houston, the Hackett Family Foundation — with less than $1 million in assets — dedicates itself to family, faith, health and education and describes itself as focusing “on ‘making some noise’ and providing the resources needed to support efforts that have sustainable impact.”
While all foundations are prohibited by law from engaging in partisan political activities, it’s also true that large foundations hold beliefs that span the political spectrum and that may influence the type of programs they support. Attempting to drain the resources of progressive foundations will also drain the resources of all other large foundations and will impair their ability to sustain long-term philanthropic commitments in their communities. Consider the damage that would be done to the Bradley Foundation’s support of faith-based, human service and arts organizations in Milwaukee; to the Coors Foundation’s funding of youth and workforce development initiatives in Colorado and to the Snider Foundation’s work with education and cultural nonprofits in Philadelphia.
Allowing politically-motivated actors to pick winners and losers in the charitable sector is a serious mistake. We all should have learned this lesson when former IRS Acting Director of Exempt Organizations Lois Lerner admitted to targeting Tea Party affiliated organizations for loss of tax exemption. An unintended side effect of such targeting is the cynicism it generates toward the entire charitable sector. At a time when mistrust of many of our nation’s core institutions is at epidemic proportions, we can’t afford to add philanthropic institutions to the list. Doing so would contribute to the destruction of civil society.
The bottom line is that philanthropic freedom is for everyone, regardless of mission.
Charitable giving is an integral part of the American experiment. Suggesting that government should favor or penalize philanthropic endeavors based on politics and ideology will ultimately destroy private giving. We should not be interfering with donors working hard to benefit their communities. Instead, we should be empowering them.
Joanne Florino is the Philanthropy Roundtable's Adam Meyerson Distinguished Fellow in Philanthropic Excellence.
