Inequality in Giving—Interview with Rob Reich, Author of “A Failure of Philanthropy”

Rob Reich is an Associate Professor of Political Science at Stanford University. He is also the author of “Philanthropy and its Uneasy Relation to Equality” in Taking Philanthropy Seriously: Beyond Noble Intentions to Responsible Giving.

Perla:  Rob, you’ve done a lot of research on how very little individual donations here in the U.S. actually go towards causes that serve the needs of the poor.  Can you update us on your research on this inequality of giving?

Rob:  It’s proceeding on two fronts.  First, I’m following up on the example I gave in the SSIR article about private giving to public schools in California.  I have a ten year database about every nonprofit in California that raises money for public schools.  I’ll be looking at the distribution of private dollars and their consequences.

Perla:  I just recently realized that you used to be a teacher.  Now it makes sense your interest in public schools.

Rob:  Yes.  I used to be a sixth grade teacher in Houston.  And the second thing - I’m in the midst of writing a book looking at the simple and fundamental question about the role of the state in providing incentives to give money away.  Why should the state provide any incentive for donations?  I think the answer is not well developed or understood.

Perla:  What’s the response you get from donors when you present your research?

Rob:  I often get a little bit of a surprise.  In particular, people don’t realize - even though it’s quite consistent in the findings - that over half of all charitable dollars, from individual donors to religion and faith-based charities that serve the poor, have already been carved out. The media has not done a good job of reporting this.  And then with respect to the inequalities in giving, in the audiences that I talk to, there’s often some thought that charity does have a role in serving the needs of the poor and disadvantaged.  And they are surprised overall how little goes to the needy.  My anecdotal experience matches up with the findings that the Google study presented - the intention that people have to give to the poor is widespread but not actualized in practice.

Perla:  Why do you think that is?

Rob:  The simple answer is that the most important reason people give money away is that they know already to give.  Poor people are not asking rich people to give money away.

Perla:  What can small and medium sized nonprofits who provide basic services for the poor do?

Rob: They should try to develop a development office.  But that’s a catch twenty-two- you need donation and overhead to get it off the ground. You can try to appeal to people’s best intentions.  Show statistics. But it shouldn’t be the responsibility of people working in these nonprofits.  This is a public policy problem. One of the public policy solutions is to provide a differentiated incentive structure.  It makes sense to me to provide additional incentives, or diminish existing incentives for things that don’t give to the poor.  How to operationalize what that would look like is still unclear.  I don’t accept that this will politicize the deduction structure.  There’s already politics involved in defining what is 501C3 and 501C4 so we’re not crossing a new threshold.  The system makes distinctions between what organizations get tax benefits and which don’t.

Perla:  What are some things that can be done to raise awareness about this?

Rob:  The media could do a better job reporting about it.  The kind of high profile glamour with which the media portray big ticket donations such as refurbishing cultural, medical institutions -  I’d like to see similar attention paid to, say, the Robin Hood foundation or other organizations where the intention is to serve needs of the poor. But I don’t want to make this a media problem or a nonprofit problem - this is a public policy issue.  There are things that nonprofits and media should do, but this is mostly a public policy problem.

Perla:  Do donors also have some responsibility to be more aware of what they are giving to?  I sometimes wonder if donors, because they tend to come from a different socio-economic background than the poor, whether they feel less comfortable being involved or giving to the poor?

Rob:  I don’t think it’s a matter of donor psychology or stereotypes about the poor because there’s been vast amounts of civil society efforts around the poor- some of which are paternalistic -but lots of activity and interest.

Perla: Do tax incentives matter?

Rob:  Tax incentives do matter, especially for high income givers. But the majority of Americans - 70% don’t even itemize - they don’t take advantage of the deductions.  The impact is less strong than initially thought.

Perla:  Is there any other research you are working on that would be of interest to nonprofits?

Rob:  Yes, I’m also working on whether the domestic poor or international poor are needier and whether the American poor have claim before the global poor?  Does the tax deduction play a role in steering donations one way or another?  The Gates foundation has a massive program for global giving.  Lots of people criticize the U.S. government for the small percentage of money spent on global aid, but if you add all the U.S. philanthropy, it’s a lot of money.  However, the foreign aid budget is publically decided and private philanthropy isn’t.  The comparable lack of benefit someone from Hurricane Katrina receives from US aid -  does that person have something to say about big foundations and how they spend their money?

Perla Ni, founder and former publisher of Stanford Social Innovation Review, is the founder and CEO of GreatNonprofits. She is also a co-founder of Grassroots.com.

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