Progress Without Profit: Nonprofits may have to bite the hands that feed them

As the term “not-for-profit” suggests, nonprofits typically lack independent income, instead relying on outside financiers to support their mission. Considering I spent far too long brainstorming it, hopefully the name of my column, “Progress Without Profit” also makes this clear. If we can agree that nonprofits depend on others for funding, we must consequently ask ourselves, who are their donors? More importantly, does the dangling carrot of promised funds incentivize nonprofits to work in certain ways? 

Not all donors are created equal in the eyes of nonprofits. It takes less energy and effort for a nonprofit to receive $5 million from one wealthy donor, than to persuade 50,000 people of average income to each donate $100. In 2017, high net worth donors in the United States gave an average of $29,269 to charity, whereas general population households donated an average of $2,514. So, while people who attend fancy galas or participate in pricey silent auctions might contribute ten times more than the typical household, they are not the most representative of society. 

This disproportionate representation forces nonprofits to toe the line between pleasing their uber-wealthy donors and advocating for change that hurts those same donors. It is the ultimate example of “don’t bite the hand that feeds you.” Nonprofits, however, should not be afraid to call out the structures supporting their wealthy donors at the expense of the communities nonprofits want to help.   

Nonprofits are reluctant to speak about political issues, for fear of losing their tax-exempt status, but maintaining tax-exempt status is not mutually exclusive to advocating and addressing root causes of inequalities. Nonprofits can advocate and lobby for important issues, provided they follow certain rules. 

Nonprofits continually shy away from discussing the tax system — specifically, bringing attention to how loopholes benefit the wealthy. People served by nonprofits don’t usually have significant capital to invest, nor to leave to their children; their taxes typically will be on ordinary income (i.e., earned wages).  

Thus, it makes sense for nonprofits to strongly oppose things like capital gains tax treatment on carried interest, as well as estate taxes and corporate tax shelters that often exploit low-income people of color for the benefit of the white and wealthy. I understand that in the short term, nonprofits’ opposition to tax loopholes may damage relationships with the big (mostly white) philanthropy that fuels them, but long-term, this opposition supports nonprofits’ stated missions. 

Economic conditions allowing tax loopholes to benefit the wealthy also create stark income inequality. A full-time minimum wage worker cannot keep their family above the poverty line. Between 1978 and 2012, a CEO’s compensation increased by 875%, while the average worker’s compensation increased by only 6%. In a more relevant example to college students, many college officials earn over $1 million a year (President Carol Folt included), while more than 20% of their workforce on campus earn poverty level wages for a family of four. 

The same system that creates the poverty and economic issues nonprofits aim to remedy also allows mega philanthropists to exist in the first place. Nonprofits hesitate to confront and call out systemic issues because their prosperity relies on people who benefit from the current system. Complicity with the system reinforces the flawed logic that mega philanthropists negate the harm caused by the accumulation of their money by simply donating a small portion of it. 

I once volunteered at a gala for a nonprofit, working with other women who were members of the community the nonprofit served. The gala attendees who streamed into the event were old, white and rich — the opposite of the women who worked the event. The women put on smiles and politely chatted with the attendees to check them in. Once we heard attendees putting thousands of dollars down for auction items in the other room, the women finally put down the masks they’d worn all evening. They recounted racist and classist comments they’d heard in the last hour, but did not respond to in order to receive donations for the organization.

This disconnect between donors and clients is not an isolated event. Appeasing donors at the expense of clients is meant to benefit the population served in the long-term. But, does it really? 

The argument against nonprofits speaking out against the wealthy is that regulating exorbitant wealth eliminates money that goes to philanthropy. But if nonprofits went after tax policies and spoke publicly about income inequality, they would be creating a more just, fair system that requires less philanthropy after-the-fact. 

If nonprofits speak out against practices that benefit their wealthiest donors and lose support, they are not ruined. Smaller donations are the future of fundraising. Nearly 50% of all GoFundMe donors are millenials and Gen X, as social media becomes an increasingly valuable tool to build coalitions of small donors for a cause. In fact, 82% of millennials report they’ve donated to a nonprofit in the last year. 

I understand that nonprofits are in a tough spot. I truly do. I’m sure many want to speak out but have to make the choice between advocating and funding. I don’t blame them for prioritizing funding, when the alternative is the collapse of a life-saving program or the firing of an essential employee. 

In a perfect world, however, nonprofits wouldn’t rely on wealth gained from the exploitation of others to operate. Actually, in a perfect world, nonprofit services wouldn’t be necessary to begin with. Until then, nonprofits should not be afraid to ruffle the feathers of big philanthropy in order to carry out their missions effectively, honestly and purposefully. 

Sophie Roppe is a junior writing about nonprofit organizations and social justice. Her column, “Progress Without Profit,” runs every other Monday.