The Giving Season: Why the 99% Are Actually More Philanthropic Than the 1%

This is the giving season and we Americans are prodigious givers.  Nearly two thirds of us donate to charities each year.  This year we will send more than $225 billion to charities.  More than a quarter of this giving will occur in December.  

Those are the bare facts.  But this year, when the stark divide between the 1% and the 99% has begun to inform our thinking and our approach, it might be instructive to examine the world of giving through that lens. 

How The 1% Differs 

Unsurprisingly, the 99% are much more generous than the 1%.  Households earning less than $25,000 give away twice as much as richer households as a fraction of their income.  The disparity is even greater given that many if not most of the 99% do not itemize their tax returns and therefore do not take a tax deduction for charitable contributions. 

To discover what motivates giving Paul K, Piff, a PhD candidate in social psychology at University of California carried out a series of experiments.  He discovered that people earning $15,000 or less are more generous, charitable, trusting and helpful to others than those earning more than $150,000. 

The 99% tend to give primarily to their church.  Giving by the 1%, on the other hand, according to Judith Warner writing in the New York Times “was mostly directed to other causes—cultural institutions, for example, or their alma maters—which often came with the not-inconsequential payoff of enhancing the donor’s status among his or her peers.” 

Indeed, empathy and compassion seem in short supply among the 1%.  Piff comments, “wealth seems to buffer people from attending to the needs of others”.   Which, as Warner notes, affirms economist Frank Levy’s observation in his 1999 book about the new inequality--The New Dollars and Dreams:  American Incomes and Economic Change.  “The welfare state rests on enlightened self-interest in which people can look at beneficiaries and reasonable say, ‘There for the grace of God…’  As income differences widen, this statement rings less true.”  

We should bear in mind that what is reported as charitable giving by the 1% significantly overstates the actual private sacrifice, as economist Uwe E. Reinhardt points out. If the wealthy donate $10,000 to charity and are in the combined 50% federal, state and local tax bracket then their effective sacrifice is $5,000 and society as a whole, without its advice and consent, subsidizes the rest. 

Foundations and the Public Good 

Much of the giving by the very wealthy is done through foundations.  Foundations account for about 13% of all charitable giving, about $40 billion a year.  Foundations may help the needy but they rarely advocate for them. "At a time when America is having a debate about the social contract, philanthropy is silent," opined Emmett D. Carson, president of the Silicon Valley Community Foundation recently told the New York Times. "We are silent about the depths of the problems of homelessness, joblessness, foreclosure, hunger, and people are starting to believe that philanthropy is irrelevant to the core needs of their communities." 

While most Foundations do not engage in campaigns to expand policies that extend a helping hand to our neighbors, a growing number are engaging in campaigns whose result may be the opposite.  This movement may have begun in the early 1980s when William Simon, former Secretary of the Treasury under Presidents Nixon and Ford and principal in leveraged buyout and private equity firms and the President of the Olin Foundation joined with others to start the Philanthropy Roundtable.