Remember “a thousand points of light”? Accepting the Republican nomination for president in 1988, George H. W. Bush celebrated what he described as a bright constellation of charitable organizations, “thousands and tens of thousands of ethnic, religious, social, business, labor union, neighborhood, regional, and other organizations, all of them varied, voluntary and unique.”
“This is America,” Bush said, “The Knights of Columbus, the Grange, Hadassah, the Disabled American Veterans, the Order of Ahepa, the Business and Professional Women of America, the union hall, the Bible study group, LULAC [League of United Latin American Citizens], Holy Name, a brilliant diversity spreads like stars, like a thousand points of light in a broad and peaceful sky.”
Bush contrasted the creativity of these nonprofit organizations with government, which, in his view, didn’t always remember that “the people are its master,” and fell hostage to “the imaginings of the social planners.” Private sector do-gooders, not top-down government regulators, would show us “what’s been tested and found to be true.”
That was then. Today, Republican doctrine is to bleed nonprofits to bail out a federal government rendered insolvent by 44 years of irresponsible tax cuts. Poppy Bush’s desire to replace government spending with private philanthropy was wrongheaded, but at least it was identifiably conservative. The GOP’s defunding of philanthropy is both wrongheaded and a violation of the conservative principle that private organizations should take the lead in addressing societal needs.
The House tax bill (text; section-by-section summary) increases taxes on philanthropies. It was news to me that philanthropies pay any taxes at all; I always thought nonprofit status shielded these groups entirely from taxation. That’s not correct. Philanthropies were first subjected to taxation in 1969, when Congress imposed a flat tax on foundations’ endowment income. Then, as now, a central motivation was Republican animus against what it deemed an overly liberal nonprofit world. Today, the Enemy is George Soros; back then it was the Ford Foundation, which took a left turn in the late 1960s under the leadership of McGeorge Bundy, former national security adviser to Presidents John F. Kennedy and Lyndon Johnson.
In signing the 1969 tax bill into law, President Richard Nixon said it “reflected a deep and wholly legitimate concern about the role of foundations in our national life.” Two years later, in April 1971, Nixon could be heard grousing about the Ford Foundation on the White House tapes. The foundation, Nixon said, funded trips to Africa by Maine Senator Ed Muskie, then judged Nixon’s likeliest Democratic opponent in 1972:
I traveled for eight years by myself. I paid it all out of my own pocket.… I financed the whole goddamn thing. Did I ever hear a word from the Ford Foundation? How many foundations suggested, “Look, Nixon, the former Vice President, is going to make this trip abroad. You’re going on a nonpartisan basis. We’d like to help”? No. They finance this son-of-a-bitch Muskie.
Under current law, philanthropies are required to pay a flat 1.39 percent tax on their endowment income. The House bill would keep that 1.39 percent tax rate for foundations with net assets below $50 million, but impose three new brackets for wealthier philanthropies. Foundations with net assets at or above $50 million but less than $250 million would pay a marginal tax of 2.78 percent; foundations with net assets at or above $250 million but less than $5 billion would pay a marginal tax of 5 percent; and foundations with net assets at or above $5 billion would pay a marginal tax of 10 percent. These higher rates would apply to 2,900 philanthropic organizations, according to the nonprofit Philanthropy Roundtable, at a total cost over the next 10 years of not quite $16 billion. As the Philanthropy Roundtable points out, that $16 billion “would otherwise support education, the arts, religious missions, medical research and local civic efforts.”
One puzzling aspect of the House proposal is that it would affect conservative philanthropies as well as liberal ones. Since 1969, philanthropy has changed in three significant ways. First, it’s gotten significantly more political. Second, many of these more political philanthropies are conservative (typically very conservative). Third, philanthropies are funded much more than they used to be by big-money donors, many of whom also throw a lot of money at conservative political candidates.
But the wealthiest foundations still follow the old philanthropic model: mostly apolitical, focused on addressing health, the environment, poverty, and other broadly societal problems. The conservative Lynde and Harry Bradley Foundation doesn’t crack the top 100; neither, as best I can tell, do any of the Koch foundations (though these operate through so many front groups it’s hard to know for sure). The richest five foundations in the United States are:
1.) The Bill & Melinda Gates Foundation ($59 billion in assets)
2.) Lilly Endowment ($40 billion)
3.) Howard Hughes Medical Institute ($24 billion)
4.) Ford Foundation ($16 billion)
5.) Robert Wood Johnson Foundation ($13 billion)
The tenth-richest is Soros’s Foundation to Promote Open Society ($10 billion). Under the House bill, there is no conservative foundation that would have to pay the highest marginal tax of 10 percent, and very possibly none that would have to pay the second-highest maginal tax of 5 percent, either.
The $16 billion that the House bill would squeeze out of philanthropy doesn’t get House Republicans very far toward actually balancing the budget; as written, the House bill will more than double the deficit. The only plausible motive for the new tax brackets is a GOP culture war against not only liberals, but also mainstream culture, as demonstrated by its war against federal grants to universities.
University culture skews liberal, it’s true, but there’s nothing especially liberal about, for example, the science funding that’s drying up with the Trump administration’s evisceration of the National Science Foundation. There’s nothing particularly liberal about any innovations that research would spawn, either, or the jobs these would create. The House bill also increases taxes on income generated by university endowments, with an even higher top marginal rate of 21 percent. That will generate an even smaller amount for the Treasury, about $7 billion over ten years.
As is true in so many other ways, such Trumpian policymaking is not so much ideological as it is pathological. It certainly isn’t conservative. Republican nihilism predates Trump (see my How the GOP Lost Its Brain, February 2023), but the problem has gotten exponentially worse in Trump’s second term. For some years now Republicans have used the very word “mainstream” pejoratively (as in “mainstream media”). Now even the mainstream conservatism of Bush’s thousand points of light is under attack.
