Hot Issue: The Attack on Charities

America has always been a charitable nation.  In 2009, Americans gave $300 billion in charity.  But in recent years private charities have come under attack by the federal government.  America’s limited government has been thrown out the window as government has taken a heavy regulatory role with charities.  In fact, instead of allowing charities and non-profit groups to prosper in a free market, the federal government has even created their own competing nonprofit-like organizations.

Government Establishment of Charities

In recent years, the federal government has taken an active role in supporting, and even setting up and running, nonprofit-like organizations.  The Corporation for National and Community Service, for example, includes three separate community service organizations—Americorps, Learn and Serve America, and Senior Corps.  Americorps consists of two programs, Volunteers in Service to America (VISTA) and the National Civilian Community Corps (NCCC), both of which provide full-time volunteers to nonprofit organizations.  Senior Corps organizes three different programs set up in the 1960s, one of them the Foster Grandparent program, where seniors can volunteer (and possibly qualify for an hourly stipend) to work with children.  The United States has moved from the role of tacit support of such nonprofit organizations, to now actively training and at times paying volunteers to work there (and thereby undermining the definition of a volunteer).

Indeed, recent legislation has only further moved the role of the federal government down this path. In 2003, President Bush signed the Strengthen AmeriCorps Program Act, which nearly doubled the number of AmeriCorps members.   After the terrorist attacks of September 11, 2001, communities came together to help each other and in response the president increased the role of such government volunteers in order to “focus their efforts more sharply on homeland security” by heightening public safety and disaster relief efforts.   The President further established a new White House Council, the USA Freedom Corps, “to promote the health of the voluntary sector in general.”   This council was to coordinate voluntary and service programs across the country, and it established www.usafreedomcorps.gov, the “largest clearinghouse of volunteer opportunities ever created.” (That entity has been disbanded by the Obama administration, with little fanfare.)

On April 21, 2009, President Obama signed the Generations Invigorating Volunteerism and Education Act (nicknamed the GIVE Act), which dramatically increased spending for these government programs.  The bill contained a stated goal of increasing participation in all AmeriCorps programs to 250,000 by 2014 (when the 2008 participation numbers were about 75,000).  In addition, the bill seriously augmented the education awards given to participants in AmeriCorps programs by tying it to Pell grants authorizations.  In all, the bill would cost the federal government about $6 billion over 5 years.

Regulation of Charities

Regulation on charities is becoming commonplace on all levels of government, in all different forms.  Adam Meyerson, president of the Philanthropy Roundtable, lists several instances in his paper, The Generosity of America:

“In 2003, …Eliot Spitzer, then Attorney General of New York, proposed a prohibition on foundations with less than $20 million in assets. His rationale was that there were too many foundations for regulatory authorities to monitor and police. In 2004, the staff of the Senate Finance Committee proposed that tax-exempt status for charities and foundations be renewed every five years and be contingent on accreditation.  In 2007, a top IRS official gave a series of speeches proposing that the IRS evaluate the effectiveness and the governance of public charities and foundations. In 2008, the California State Assembly passed a bill requiring large foundations to disclose the racial, ethnic, and gender composition of their staffs and boards, as well as those of their vendors and grantees.”

Regulation at the state and federal level has been enacted and is being discovered, indicating the time when charities could focus solely on their benevolent activities (and not adhering to government regulation) is over.

But the most discussed type of regulation for charities is that on its tax status.  Rep. Xavier Becerra (D-CA) recently referred to the tax-favored treatment of charitable giving as an earmark, and proclaimed that Congress has an obligation to determine if philanthropic assets advance the public good. This determination would involve much paperwork and hassle for charities, and turn their focus to defending their charitable work, rather than actually doing their charitable work.  Others have suggested that the charitable deduction should be limited to those organizations that help certain demographic communities or peoples. Essentially, government would pick winners and losers with philanthropic giving—an appalling scenario considering this money was already privately donated for a specific purpose, not to mention that government officials already have trillions of dollars with which to pick winners and losers.

The attack on the tax status on charities has also extended to charitable donors.  President Obama announced a proposal in 2009 to reduce the tax deduction for charitable gifts for wealthy Americans.  Under his plan, “households making more than $250,000 would see their tax deduction for charitable giving drop from 35 percent to 28 percent.”   Charities and Congressional lawmakers across the nation spoke out against the plan, citing the potential decrease in contributions that may result.   One study by The Center on Philanthropy found that the administration’s tax proposals would result in a 4.8 percent reduction in itemized giving, which translates to about $3.9 billion.

One nonprofit leader, Joel Berg, disputed that claim and voiced support for the proposal in a Washington Post editorial, claiming that the bill would only affect 1.2 percent of the U.S. population, and only decrease charitable contributions by 1.3 percent.   The House Republican Whip Office responded to Berg in a blog post and called out the Democrats’ attempt to “replace private charity with government charity.”   They note the similar theme between the GIVE Act and the proposed tax change (both encourage government-sponsored organizations over private) and they further note that Berg benefits from several (“about 14”) AmeriCorps volunteers a year, some of them “writing grant applications…all paid for by the taxpayer.”   Additionally, they point out that Berg’s organization received “over half of its funding from government agencies.”   Clearly, Berg profits from this replacement of private charity with government charity, explaining his support for such matters.

Government Subsidies Crowd Out Charitable Giving

Furthermore, government subsidies to organizations change the incentives of givers and “‘crowd out’ private giving.”   Arthur Brooks, the author of Who Really Cares, finds that: “The government’s ability to redistribute income to increase economic equality…displaces the private responsibility some people feel to give voluntarily.”    In “one of the bitterest ironies of liberal politics today,” the desire to donate government money to charities often displaces an individual’s own charitable donations.     Brooks’ research demonstrates that “political opinions are apparently taking the place of help for others,” as “[p]eople who favor government income redistribution are significantly less likely to behave charitably than those who do not.  Even if the policies they support do not come into effect, they are still far less likely to donate to charity.”   Studies such as these are important to note when considering the real impact that government regulation and replacement of private charities has on a culture and country.

Move to a National Community

Lastly, with the growth in government charity has been a rhetorical movement for a “national community.”  Michael Joyce and William Schambra write extensively on this movement that focuses on a national community, rather than multiple small communities and associations in their essay “A New Civic Life” in To Empower People: From State to Civil Society.   They describe such a movement as “an effort to construct within America’s borders a great national community, which would summon Americans away from selfish interests and parochial allegiances toward a commitment to an overarching national purpose.”   Joyce and Schambra trace the call for a national community to the Progressive movement in the early 1900’s, “in response to what appeared to be dramatic and permanent changes in the way Americans had traditionally conducted their everyday life.”   Before the modern era, they describe, individuals were bound by familial relationships, neighborhood groupings, and other active voluntary associations.   And these communities had significant effects on the individual: “Through these small, local, ‘human-scale’ associations, Americans not only achieved a sense of belonging and connectedness but also tackled the full range of social and human problems that today have largely become the province of government.”   And better still, because the associations were small, the individuals involved in them had considerable say in them, and thus in the decisions that determined their lives.

In summary, recent increases in government charity, a move towards a “national community,” and the juxtaposition of the GIVE Act and the tax proposal, signify a substantial change in policy towards charities.  While non-profit associations were once seen as groups that organized outside of (and sometimes in spite of) government, we are now seeing a meshing of the two groups—a move that burdens charities with sometimes oppressive regulations, limits the free market of non-profit groups, and could have a substantial impact on charitable giving in the United States.