Charities Will Suffer if Regulators Have Their Way

Fri, 27 Mar 2009 21:32:51 +0000 – Loren A. Smith, Jr.
Senior Fellow for Labor and Employment Policy at the Institute for Liberty

Many observers were surprised when President Obama suggested cutting back the charitable tax deduction in his budget. However, that was only the latest left-wing threat to charity, and as of this writing, that idea may be defeated in Congress.

Potentially a much larger threat is a move among members of Congress and special interest groups to regulate how and where charitable giving takes place. If enacted, it would result in a vast thicket of federal regulations on how well-meaning individuals and groups can spend their charitable dollars. Many philanthropists would conclude that it's just not worth the trouble, and many more would see some of their giving siphoned off to groups and causes they do not support.

How could this happen?

The Berkeley, California-based Greenlining Institute purports to support empowerment for minority communities, including urging foundations and philanthropists not to neglect those communities. It's a worthy goal, but it doesn't stop there. The Greenlining Institute supports government regulation to evaluate whether a private foundation's giving is "diverse" and "local" enough. This would be followed by government regulations to compel charities to give money out according to government standards.

What's Greenlining's M.O.? Last year, the organization prompted a California state Assemblyman to introduce a bill, AB 624, which would have required some private foundations to disclose the race and gender (and in the bill's initial form, the sexual orientation) of their board members, staff, and grantee staff.
Greenlining pushed for the measure based on its own questionable studies of giving patterns by California foundations. Although AB 624 passed the California State Assembly, its chief sponsor pulled the bill after strong opposition emerged in that state's philanthropic community and some foundations cut a deal for increased funding to projects favored by Greenlining.

Greenlining has since moved on to other states, and has expressed interest in placing new race- and gender-based disclosure requirements on private foundations at the federal level.

Given the real support these ideas have in Congress, and the constellation of other issues occupying the public's attention, Greenlining's agenda could be enacted without a real chance to argue the pros and cons.

In addition to the ethical question of how the government can regulate a person's or a private entity's own charitable giving, this agenda will hamstring charitable giving. Any additional burden placed on the act of charity, either through government regulations or societal pressure, is a surefire way to cut down on what donors will give.

Less charity, more bitterness. Just like the recession itself, except it won't end and will cause particular harm to those most in need.

Loren A. Smith, Jr. is the Senior Fellow for Labor and Employment Policy at the Institute for Liberty.