Philanthropy is facing a $13-25 billion annual drop off in capital inflow as a result of the estate tax repeal. This is the estimate provided by the Congressional Budget Office if the repeal at its 2009 scheduled level was in effect today.
So, where are we going to find $25 billion? Some will point to the "intergenerational transfer of wealth" and say "There! Over there! There it is!"
I don't think its quite this easy. Sure, some of the wealth built by the WWII generation and now passing to baby boomers goes to philanthropy. But this is actually the same river of revenue from which the estate tax repeal will be diverting resources. It seems a bit much to just sit back and hope the river is big enough that the dam doesn't really get in the way.
Starting now and continuing for the next few days, I'll give you a few other ideas on how to find and cultivate new sources of philanthropic revenue over the next 5-10 years. These are half-baked ideas. Most may be unworkable, but some might have some stickiness.
We know one thing - we need to keep growing philanthropic revenue, and the estate tax repeal is not likely to help that cause. So lets start brainstorming and maybe we'll get somewhere. Comments are more than welcome on these ideas, the need to address the issue, how to take it further - perhaps we can get a real conversation going or even real R & D on new philanthropic financial products.
1. Community Remittance Funds
Immigrant remittances from the US to countries of origin like Mexico, the Philippines, and China aggregate into the billions of dollars annually. These billions are made up of millions of small gifts, coming together at both the point of origin (the immigrant community) and the point of focus (the home towns). How can we capture the similar community commitment that exists between intra-national communities? Rural to urban migrants? Generational migrants?
What if we could focus on aggregating the millions of small gifts from the hundreds of thousands of people who leave small towns for big cities but want to come back? (or leave big cities for the suburbs and want to give back?)
Community foundations are in the right place to do this, but they can't pay their overhead when they focus on lots of small gifts. Commercial gift funds have the infrastructure to reach all the smaller givers, but aren't going to invest in marketing to them.
Perhaps we can package these little gifts into big gifts, where the economies of scale make sense for community foundations or commercial funds to support the aggregating of little gifts into big gifts. After all, investment banks package individual mortgages into big securities, lenders package credit card debt, and community foundations package local gifts with outside matches.
Can we package the small into the big, securitize the package, and move the resources to where they're intended to go? Can we create a fee structure to do so that supports the transactional process? Might the transactional process itself be some sort of new philanthropic resource?
Three good things to realize about smaller givers as a market - 1) they aren't now influenced by the estate tax, so the repeal won't change their behaviors, 2) they already provide the majority of philanthropic giving, and 3) they come in every shape, size, race, creed, denomination, and preference - they are everywhere, and we have more and more tools to find them and help them find each other.