Rob Reich (2018)
Just Giving: Why Philanthropy Is Failing Democracy and How It Can Do Better
Princeton University Press
Paperback: ISBN 9780691202273, £14.99
Hardback: ISBN 9780691183497, £22.00
E-Book: ISBN 9780691184395
Rob Reich’s Just Giving should be required reading for all scholars and practitioners of the non-profit sector. In it, Reich sets out to establish a rationale for state support of philanthropy in democratic society. The US government generously subsidises philanthropy via tax exemption, but justifying this subsidy through liberal democratic theory introduces problems. Reich documents the ways in which philanthropy conflicts with democratic norms and perpetuates inequality. Ultimately, he finds value in philanthropy’s capacity to advance pluralism and catalyse social policy innovation.
When John D. Rockefeller sought a federal charter for his philanthropic activities in the early 20th century, Reich recounts, he could not overcome Congress’ view that philanthropy is incongruous with democracy. Reich identifies characteristics of philanthropy that conflict with democratic values – namely, that philanthropy lacks accountability and transparency. Foundations do not answer to consumers or voters, as for-profit companies and the government must. The media can help hold foundations accountable, but the secretive nature of philanthropic activity makes even this difficult; foundations are not required to share any information with the public except for that disclosed in an annual tax form. Philanthropy seems incongruous with democratic society because it amplifies the voices of the wealthy over the will of the masses. Philanthropy’s undemocratic nature could be forgiven in light of its egalitarian ends, but Reich shows that the practice of philanthropy has much more to do with inequality.
Andrew Carnegie’s (1889) Gospel of Wealth popularised the view that philanthropy should redistribute the uneven gains of the marketplace (Carnegie, 2017 ). Reich counters that philanthropy often perpetuates inequality instead of solving it. Less than a third of all charitable giving in the US goes towards supporting people living in poverty, and households with incomes greater than one million dollars give, proportionally, even less to these communities (Center on Philanthropy at Indiana University, 2007: i, 31). The charitable contribution deduction, designed to incentivise charity, also worsens inequality, offering greater value to the wealthy. Because the tax incentive assumes the form of a deduction, an individual taxed at 37% – who earns greater than $500,000 per year (£359,195) – receives a $370 (£266) subsidy for their $1,000 (£718) gift, while an individual in the 10% tax bracket – who earns less than $10,000 per year (£7,184) – receives a $100 (£72) subsidy for the same gift. Further, only households that itemise their taxes, which predominantly include wealthy individuals and families, can take advantage of the deduction. The laws regulating philanthropy, Reich argues, favour those who have already reaped the fruits of the marketplace. Philanthropy’s egalitarian efforts are, therefore, not enough to justify the state subsidy it receives. Reich turns instead to philanthropy’s capacity for advancing pluralism and innovating on social policy.
Philanthropy complements democractic society, Reich concludes, in promoting diverse beliefs and developing innovative solutions to public problems. Philanthropy serves as a means for individuals to express their preferences about the provision of public goods, encouraging pluralism and preventing government hegemony. It catalyses the production of niche public goods, like avant-garde art, that would not otherwise be funded by majority will. In addition to enabling a broader view of the public interest, philanthropy is the perfect vehicle for social policy experimentation. Because it has no formal body (for example, voters or consumers) to which it answers, philanthropy can take risks that the market and government cannot. Philanthropy, therefore, is best positioned to invest in social policy innovations that the government can then adopt and scale; Reich cites Carnegie’s funding of early public libraries as the chief model for this concept. These virtues – the ability to advance pluralism and innovate on social policy – legitimise state support of philanthropy in democratic society.
Just Giving’s strongest contribution is its discussion of the charitable tax deduction. In lieu of the deduction, Reich prescribes a charitable tax credit, which would offer the same subsidy to all donors irrespective of their income. A charitable tax credit would increase the giving incentive for low-income donors without significantly reducing the incentive for wealthy individuals. Additionally, it would eliminate the itemisation barrier that prevents the majority of US households from claiming charitable deductions. Just Giving proves prescient in this latter respect. The Coronavirus Aid, Relief, and Economic Security Act 2021 (also known as the CARES Act) established a $300 (£216) above-the-line deduction for charitable contributions that non-itemisers can claim. This recent move suggests that Congress is amenable to making a charitable subsidy available to non-itemisers, and Reich’s book provides the philosophical foundation to justify such a policy shift.
Just Giving breaks ground in its outright challenge of philanthropy’s fit with democracy. Reich is at his best when demonstrating the ways in which philanthropy fails to fulfil its egalitarian promise. He does not, as adherents of traditional philanthropy might fear, advocate for the elimination of philanthropy. Rather, Reich proposes a deep restructuring of charitable norms and regulations that would enable philanthropy to live up to its eleemosynary aims.
Just Giving is an essential read for anyone – academics, non-profit professionals, volunteers and donors – with a vested interest in the provision of charitable services and the communities they serve.
Center on Philanthropy at Indiana University (2007) Patterns of Household Charitable Giving by Income Group, 2005, Indianapolis, IN: Center on Philanthropy at Indiana University.