The Big Problem in Charity That Giving Tuesday Can’t Fix

Charitable giving is up. But small donations are down.


Charities and nonprofits could hardly contain their enthusiasm leading up to Giving Tuesday. On social media, everything from National Geographic to the Kennedy Center has been promoting it for days. No shame there. Whole Whale, a consultancy for nonprofit organizations, estimates that the charitable-industrial complex can expect to end the day with a record haul of $250 million.*

But beneath the success of Giving Tuesday is an uncomfortable reality. While Americans are giving more money to charity than ever before, a little-noticed report released last month by the left-leaning Institute for Policy Studies finds that the money is coming from fewer and fewer people. And that, the research group says, has troubling implications for our democracy, not to mention our nation’s traditional reliance on charity as a mechanism for smoothing gaps in the social safety net.

These donor dropouts may be yet another manifestation of income and wealth inequality. Americans gave a record-setting $373 billion to charitable endeavors in 2015, according to the Giving USA Foundation’s annual philanthropic survey. When the Institute for Policy Studies crunched the data to discover who exactly was giving what, it discovered that itemized charitable donations from households with earnings of at least $10 million annually increased by 104 percent in the decade between 2003 and 2013. Even those with low-six-figure earnings upped their giving—those in households earning at least $100,000 increased their donation budgets by 40 percent in the same period. But those earning less than $100,000 did the exact opposite: Their contributions declined by 34 percent.

The Institute for Policy Studies is hardly alone in seeing an issue here. Market researcher Target Analytics has tracked a decline in what are known in the trade as small-dollar donors, claiming the number of people giving money in response to direct mail appeals fell by 25 percent between 2005 and 2015. The vast majority of respondents to such missives give less than $250.

If some people give more, many give less, but record-breaking amounts of money are raised, what’s the problem? The problem is that the places the money goes reflect the values and intentions of the people giving it.

The venerable 92nd Street Y in New York City and the United Nations Foundation started Giving Tuesday in 2012 as a counterpoint to the commercial crassness of Black Friday and Cyber Monday, hoping to restore a charitable spirit to the final days of the year. Giving Tuesday also marks the start of the annual charitable-giving gold rush. Nonprofits receive about one-quarter of the donations they receive all year in the period between Thanksgiving and the end of the year, with 1 in 8 claiming they raise half their haul during the short period.

By all measures, Giving Tuesday counts as a major success. Last year, nonprofits raised $117 million on the day, an increase of more than 150 percent over 2014. The median size of a last year’s Giving Tuesday donation was $100. Charities rejoiced. (Few thought to mention that sales on 2015’s Cyber Monday exceeded $3 billion, also a record. It’s safe to say the commercial spirit of the season endures.)

The rest of the year, of course, charities generally chase big donors for the obvious reason: That’s where the money is. Wooing donors, even small ones, is work, and any ongoing concern wants to maximize the money coming in while minimizing the effort to raise it. But relying on a small number of major donors, instead of a large number of smaller ones, results in its own sets of problems.

First, many charitable givers are erratic, giving to one cause one year and another the next. But when there are multiple streams of donor income, even if in small amounts, the flow is generally steady. Big money, on the other hand, leaves charities vulnerable to sudden income shocks. New York’s Big Apple Circus, for instance, a city institution for more than 30 years, recently scaled back to small performances for ill children. The issue? Financial firms like Merrill Lynch and Lehman Brothers were large supporters before 2008, but cut back (or collapsed) due to the financial crisis, leaving the beloved institution with a significant shortfall. It filed for bankruptcy this fall.

Small-dollar donations offer another benefit, too: no strings attached. Large donations tend to come with conditions. Sometimes a funder is so intent on a particular cause of an organization that he or she forgets about mundane needs like electric bills and administrative staff. Two- and three-figure donations cover that stuff—if there are enough of them.

Meanwhile, social-service organizations are disproportionately dependent on small charitable gifts. Well-off givers send a huge percentage of their donation to education and the arts, while many prefer international causes to more homegrown needs. The local food bank isn’t likely to attract the attention of a megadonor; Harvard University and the Met don’t have that problem.

The contributions of the 1 percent can be notoriously self-interested, and I’m not talking about Donald Trump’s use of his foundation as a piggy bank for his business matters. We may think warmly of Bill Gates’ vows to give away the vast majority of his fortune, and needed efforts like the Gates Foundation’s efforts to eradicate polio in places like India and Africa. But it’s also helpful to contemplate the $2.5 million that Jared Kushner’s father, Charles Kushner, donated to Harvard before his son’s successful application to the elite institution. Yes, it’s giving. But it’s giving that reflects the priorities and needs of the donors, which are not necessarily the priorities and needs of the greater society.

The upper-middle-class isn’t above such similarly solipsistic charitable endeavors—see, for example, public-school fundraising appeals. The wealthier the parent body, the more money the school will collect. Pleas by school districts to get parents to spread the wealth are almost always met with refusals. When the Santa Monica–Malibu Unified School District attempted to require school fundraising bodies to contribute a percentage of their get to a common fund for all schools in the district, many complained the move would leave them “disenfranchised.” In this case, charity starts at home and stays at home.

Finally, as the Institute for Policy Studies also points out, big-dollar donations can substitute for more public, democratic decisionmaking. Take the Robin Hood Foundation, the charity founded by hedge-funder Paul Tudor Jones. It earns hosannas for raising tens of millions of dollars at its annual New York City fundraising dinner, where a table costing $250,000 is advertised as paying for 2,500 children to attend preschool. Less attention is paid to the fact that the same millionaires and billionaires congratulated for their largesse at the yearly shindig fought back an attempt by New York City Mayor Bill de Blasio to increase the city’s income tax on households earning more than $500,000—which estimates said would raise $532 million for the city annually.

In this equation, charity is broadly redefined to include a range of political goals. The hashtag #GivingTuesday is being used to promote donations to support the protesters at Standing Rock. The Institute for Policy Studies seeks money on the day, too. And a major beneficiary of overall giving appears to be conservative causes. As David Callahan, founder of the website Inside Philanthropy and author of the upcoming book The Givers: Wealth, Power and Philanthropy in a New Gilded Age, noted in a recent blog post, “Charitable giving has fueled the rise of a vast national and state infrastructure of policy and advocacy groups on the right that have advanced a range of policies that favor the wealthy, starting with tax cuts and deregulation.” Take Trump’s pick for secretary of education, Betsy DeVos, who is routinely identified as a philanthropist. Her cause? Pushing vouchers that can be used to pay for private schooling, including religious institutions and for-profit charters.

The IPS report’s authors conclude with several suggestions for reform, which include structuring the charitable tax deduction so that givers receive more consideration for donating for community needs like helping those in immediate need; offering a tax credit to all who give to charity, not just those who itemize; and forcing charitable foundations to spend more of their assets annually. They’re all great ideas. They also have the proverbial snowball’s chance in hell of happening. In fact, Donald Trump’s in favor of all but eliminating the estate tax, something that will almost certainly cause a decline in charitable giving, since tax avoidance is a large motivation for it.

None of this is to say Giving Tuesday is a bad thing. In fact, it’s a good thing. It almost certainly results in more money going to charity, and that money is donated in a way that allows the charities to decide how to best use it. But it’s worth taking a moment to note the irony of another group using the Tuesday after Thanksgiving to draw attention to its cause this year: the Fight for 15 movement, which is staging strikes and job actions in cities across the United States to protest low wages, is the sort that not only prevents donations to charity, but turns people who might otherwise be donors into recipients of it. If the Institute for Policy Studies is right, giving America’s lowest-earning workers a raise will likely make the economic foundations of the our nation’s charities more solid, too.

*Correction, Nov. 29: This post originally reported that the organizers of Giving Tuesday estimated it would raise $250 million this year. The estimate was made by Whole Whale, a consultancy for nonprofit organizations.