Aug 13, 2022 - Economy & Business

The shift from charity to philanthropy

Illustration of a hand with scissors cutting a ribbon in the shape of a dollar sign
Illustration: Sarah Grillo/Axios

Pretty much the entire U.S. nonprofit sector is witnessing a move from individually-determined charitable donations to institutionally-determined philanthropic strategies.

Why it matters: A new report from the Institute for Policy Studies shows megaphilanthropy crowding out individual donations.

By the numbers: 20 years ago, two thirds of American households gave to charity. Today, it's less than half. Meanwhile, households earning more than $1 million per year accounted for 40% of charitable deductions in 2019, up from 10% in 1993.

  • Some $25 billion was donated by megadonors in 2021. About 80% of that $25 billion went into private foundations and donor-advised funds where the donors retain full control of how (and even whether) the money is spent.

The bottom line: Charities like to say that "every penny counts." In reality, small-dollar donations have never mattered less. Increasingly, it's a small number of ultra-high net worth individuals, alongside even fewer old money foundations, who determine whether charities thrive or wither away.

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