A Wealth Gap Runs through Charities

Income and wage inequality issues have found their way solidly into the news maw lately. The Occupy movements and President Obama’s re-embrace of the issue as he gears up for re-election in 2012 have helped keep economic inequity in the spotlight. And for years Vermont’s Senator Bernie Sanders has been reliably speaking out about the US wealth gap. He routinely quotes this startling fact
In 2007, "the top 1 percent of all income earners in the United States made 23.5 percent of all income," which is "more than the entire bottom 50 percent." This pattern of economic extremes has trickled down to the US charitable sector says a group dedicated to making foundations more effective, Caring for Change

The top 2.5 percent of charities that report data to the Internal Revenue Service have over 50 percent of the sector's wealth and bring in over 60 percent of charities' annual revenues. Colleges, hospitals, and primary health-care facilities dominate that top tier. In contrast, human-service groups, which account for more than a third of all charitable organizations, have only about 13 percent of annual revenues and 11 percent of assets.

This two tiered situation is particularly troubling as all levels of government embrace austere budgets, cut back on programs and encourage private charities to take up the slack. Some of the most under-resourced organizations Caring for Change says are often the ones that want to deal with suffering communities in decline but are often challenged by lack of resources.

Another private sector feature casting its shadow on the non-profit world is the pay gap between upper level executives and staff.

Indeed, some top-tier charitable institutions further exacerbate inequality through their own internal practices. Far too many of them pay salaries that put senior executives in the top 1 percent of earners, often while having a large base of staff at or near minimum wage.

And Vermont is not immune from upward pressure on non-profit executive pay packages. A Vermonter involved in non-profit work defended departing Fletcher Allen CEO’s pay package of $826,000 plus performance bonus of $245,000.He described the amount as “right” and said under-compensation was the challenge. Health and health cost related issues are major causes for families plunging into poverty so spending patterns in the non-profit hospital sector is particularly important part of a safety net. However according to Caring for Change

two-thirds of non-profit hospitals dedicated less than 2 percent of their total expenses to charitable medical care only 7percent dedicated more than 5 percent.

And finally the ironic charitable deduction:

...the tax deduction for charitable gifts benefits only those who itemize their returns -- the wealthiest Americans -- while it costs government revenue that might otherwise go to serve people and communities in economic distress. In other words, the deduction itself can be seen as exacerbating economic inequality.