Philanthropy Under Pressure in the US

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When Alexis de Tocqueville visited North America in 1835, he noticed something unique: its capacity to nurture “the spirit of association.” In a now oft-cited quote from his seminal Democracy in America, he said that when citizens are able to associate freely “they end up seeing in association the universal and, so to speak, unique means that men can use to attain the various ends that they propose.” Put simply, when people are free to work together, stuff gets done.

For de Tocqueville, this ‘spirit of association’ had the capacity to elevate American democracy well beyond the scope of elected offices and enable those who share a common goal to drive action from the ground up. And, for many years, this culture has allowed the US to thrive and tackle many of the problems in its midst. But this communal spirit is now in danger, with philanthropies, private efforts to provide disaster relief efforts, and local job retraining program under threat from a swathe of recent regulations from across the political spectrum.

These emerging threats come after a banner year for charity incomes and grassroots action, mostly due to the rise of what have been dubbed ‘rage donors’. Spurred by some policies of the Trump administration, people have resorted to charity as a defensive measure. Organizations such as the ACLU, the Southern Poverty Law Center and Planned Parenthood reported increases between 8000% and 1000% in their donations after Trump’s first 100 days. The super rich also chipped in – The Chronicle’s annual top-10 list of the largest gifts announced by individuals recorded 3 gifts exceeding $1 billion. Unlike small donors, however, these philanthropists tend to endow foundations bearing their names, channeling funds to pet causes.

But dark clouds loom on the horizon for smaller donors. An unintended consequence of the new tax bill, which doubles the standard deductions for individuals and households is that taxpayers who now itemize deductions will find that it is no longer financially expedient to do so. As a result, an estimated 10% of taxpayers will continue to itemize deductions on their returns, compared to a third of taxpayers at the moment. Some experts foresee a drop in charitable giving of around $14 billion next year, around 5% of the $282 billion that US charities pulled in last year.

Organization such as United Way worry that it will no longer be as easy for the ‘little people’ to donate and – inevitably – it will be the little people who rely on support from charitable foundations who will suffer. Non-profits in the country – many of whom have other much more pressing issues such as hurricane disaster relief to contend with – will have to deploy resources to try to navigate their way out of the current ‘zone of uncertainty’ that they find themselves in.

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These tax tweaks could also have an impact on the nature of the culture of giving. Charities will need to solicit greater donations from the mega-rich and large organizations, who are much more likely to want input into how and where the money is spent – something that is likely to leave aid in the US becoming even more politicized, further warping an already divided US society.

But the ‘spirit of association’ is under threat from other quarters as well. The recent fires in California saw the rise of “DIY disaster relief” as authorities found themselves hamstrung by red tape and incompetence in their attempts to deal with the aftershock of a calamity that many are suggesting may have been caused by federal incompetence in the first place. Even at this more grass-roots level, government action is putting the ability of the people to act under threat. Fixed based aviation operators (FBOs), for example, have played a vital role in recent disaster relief efforts – storing and distributing supplies as part of the aid efforts for Puerto Rico and the California fires. But new restrictions that are being pushed by AOPA, a pilot’s association, could threaten their existence and choke off their ability to provide support in such situations in the future. It’s already concerning that the state isn’t doing enough, but picking off the other organizations that are willing to step up into the breach is downright shameful.

Longer-term aid programs are also under threat. Cuts to the Department of Labor’s budget mean that plans for local re-training programs will almost inevitably fall by the wayside. For example, key grants aimed at promoting economic development in coal regions, such as the Appalachian Regional Commission – an organization created in 1965 to address the persistent poverty and growing economic despair of the Appalachian Region – and the Economic Development Administration – which provides grants to regions under economic stress – are set to go up in smoke. If that comes to pass, some of the most vulnerable people in deprived areas will no longer benefit from the much-needed leg-up they provided.

But while this is bad news for the most vulnerable among us, some of these funds may be able to be reversed thanks to the advent of so-called donor advised funds that lets small-scale philanthropists put their money into an account, let it accrue tax free, and distribute it at a later time. While not without their criticisms, such as their potential for being used as little more than a holding pen for the assets of people who may want to enjoy a tax reduction without being charitable, these financial instruments could nevertheless help organizations dependent on small donors.

What this means is that the freedom and ability to set up associations, replace government functions and extend democracy will founder without continued support from the state. And right now, some lawmakers could do well to remember de Tocqueville’s advice.


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Author: Claire Robinson

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