The munificence of American corporate titans warms the heart, sort of. The Chronicle of Philanthropy reports that the top 50 donors gave $7.3 billion to charity last year — about $150 million per head. Excluding Warren Buffett’s $43.5 billion burst of generosity in 2006, last year’s giving easily beat the record set the year before.
This is great news for many worthy causes. Last year’s top donor, William Barron Hilton of hotel fame, pledged $1.2 billion to his father’s foundation, which supports efforts to prevent blindness worldwide, curb drug abuse among the young and help the homeless, among other things. Other donors targeted cancer research and children’s health clinics.
Yet we’d be so much happier about all the good things America’s moneyed elite pay for if the government made needed public investments.
The flip side of American private largess is the stinginess of the public sector. Philanthropic contributions in the United States — about $300 billion in 2006 — probably exceed those of any other country. By contrast, America’s tax take is nearly the lowest in the industrial world. Federal, state and local tax collections amount to just more than 25.5 percent of the nation’s economic output. The Finnish government collects 48.8 percent. As a result, the United States spends less on social programs than virtually every other rich industrial country, according to the Organization for Economic Cooperation and Development. The Finnish government probably has money to build children’s health clinics.
Critics of government spending argue that America’s private sector does a better job making socially necessary investments. But it doesn’t. Public spending is allocated democratically among competing demands. Rich benefactors can spend on anything they want, and they tend to spend on projects close to their hearts.
A study last year of 8,000 gifts of $1 million or more to 4,000 nonprofits found that 44 percent went to higher education, 16 percent to medical institutions and 12 percent to arts and cultural organizations. Only 5 percent were dedicated to social service groups. Nonprofit groups that rely on the largess of the wealthy are doing fine. The Cincinnati Ballet met its 2007 target of $1.1 million in just five months, the Chronicle said. Giving is down at Lighthouse Ministries, which serves the needy in Florida.
Philanthropic contributions are usually tax-free. They directly reduce the government’s ability to engage in public spending. Perhaps the government should demand a role in charities’ allocation of resources in exchange for the tax deduction. Or maybe the deduction should go altogether. Experts estimate that tax breaks motivate 25 percent to 30 percent of contributions.
In any event, social needs, like those health clinics, are not about charity. They are a necessity. America needs a government that can and will pay for them.