A recent talk by Robert Greenstein, founder and CEO of the Center for Budget and Policy Priorities and a MacArthur Fellow, questioned the impact on the less fortunate and a social compact decimated by current federal and state budget and political battles. He highlighted public policy challenges and choices arising at the intersection of current federal and state fiscal and tax policies; the worst overall level of poverty in decades; and sharply increased income inequality and wealth distribution. Most, if not all, facilitated and exacerbated by fiscal and tax policy choices. Greenstein argues the path forward will need substantive action on both budget and tax policy.
Reflecting on his exploding graphs showing future economic devastation given current trends, leaves one to question whether public numbness to these dire pictorial displays will be overcome by substantive action. If so, what might be philanthropy’s role?
First, Greenstein stated philanthropy should do no harm. Yet to take no action in the face of decreasing charitable giving and decreased program spending by governments represents increasing risks to those adversely affected by these policy choices and for whom much of charity seeks to ameliorate, if not remove, their detrimental impacts. These policy choices ignore fundamental realities. Over time charitable giving fluctuates within a small range as a constant percentage of GDP and therefore subject to overall economic fluctuations. Government tax revenues provide funding streams which private charitable gifting will never offset and ongoing payment for services which government has sought to outsource and contract on behalf of the less fortunate.
Second, what is the role for foundations whose pools of capital were generated and accumulated through private wealth and now sustained through tax exemption? Greenstein argues foundations should advocate for a balanced approach recognizing that neither draconian budget cuts nor increased taxes alone provide meaningful solutions. For many foundations this may require reconsidering their role in public policy and advocacy in light of the Citizens vs. United States Supreme Court decision and current tax law constraints.
Finally, he suggests philanthropy should draw a “circle of protection” around programs and services to protect the least fortunate among us. In drawing this “circle” the core question for him is “What is to be the moral character of this country?” The answer to his question will always be a work in progress.
Since his talk “Occupy Wall Street” (or perhaps “Occupy Main Street” as this fledgling social movement expands) raises this question to a visceral level, though still in somewhat inchoate form. Simplistically, this movement argues something is fundamentally amiss when multinational, multibillion dollar corporations pay little or no taxes and their senior management paid at levels not commensurate with the risk of individual ownership, while people struggle to make ends meet and pay taxes.
Does this message resonate in the nonprofit sector? In the face of significant basic human needs, the Occupy movement’s analysis and criticisms of corporate America may apply equally to many nonprofit organizations currently enjoying tax exempt status. Thus, when the nonprofit sector seeks only to protect its charitable deduction in this debate, the sector loses its moral grounding. The sector becomes merely another special interest group seeking to protect its own interest and not serving a greater good–behavior which is part of the problem!
In our history these are not new issues nor is any movement the bearer of the absolute truth. Whether or not the “Occupy” movement will translate into substantive political and economic changes, as its counterpart the Tea Party seeks to do, remains to be seen. At a minimum philanthropy’s role must be to advocate and to protect on behalf of the least fortunate while as a nation we seek to answer these policy questions for this generation.
Much of the nonprofit sector is founded on morals, principles, and beliefs that for generations never depended on tax deductibility as a motivation for helping others. If the best argument the sector can muster is these motivations will go away by removing the charitable tax deductible, then the sector already has lost its way. The human motivations prompting charitable acts and support for those less fortunate will survive and adapt even if the charitable tax deduction is written out of the tax code.
What remains is whether the nonprofit sector will act as a special interest supplicant or serve as moral leadership seeking a higher common good?