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U.S. `CHARITIES': 1,000 POINTLESS LIGHTS?

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We Americans pride ourselves on the extent of our charitable efforts. We can boast of nearly a million non-profit philanthropic agencies, and both their number and income have been increasing for at least 50 years. They make up a system that performs many admirable and important tasks. But it's time we recognized that most of the benefits of philanthropy go to the wealthy, not the needy or even the middle class.

Consider, for example, the "thousand points of light" President Bush invoked as he accepted his party's nomination in 1988. Bush named several voluntary organizations, but he failed to refer to even one of the small group of elite non-profit institutions - Ivy League universities, museums, symphonies, think tanks, private hospitals, prep schools and the like - that, by best available estimates, receive more than two-thirds of private charitable giving.About half of philanthropy is donated by multimillionaires. Most of this money goes to groups that sustain the culture, education, policy positions and status of the well-to-do. Rich people, for example, support the "high-art" offerings of symphonies and ballets; the hospitals to which they contribute usually are not public facilities, but overwhelmingly private institutions, most of whose patients have insurance. Contrary to popular belief, less than one-third of non-profit organizations serve the needy. In much of their charitable giving, in fact, the wealthy end up funding their own interests.

Even more disturbingly, the philanthropic wealthy also exert control over public funds and over money contributed in smaller amounts by the less well-off, without the accountability we expect in a government agency or publicly held corporation.

Public funds, in fact, make up about one-third of the budgets of most tax-exempt organizations. So, in effect, the non-elected wealthy individuals who oversee non-profit organizations hold sway over the disposition of not only their own money but also of tax revenues.

Of course, hundreds of thousands of people make smaller charitable contributions, but most of these middle- and working-class individuals do not become board members of the agencies they help to support.

Non-profit managers have long understood that an effective way to safeguard the flow of funds is to find rich people who will serve on their boards. These people then contribute out of their own pockets, and ask their friends to do the same. Thus, they trade favors within a philanthropic network by funding each other's causes, compounding the effect that makes a ballet company more secure than a grass-roots anti-poverty program.

Charitable actions also serve the wealthy well under the income and estate tax system. Those who give large amounts receive far larger tax breaks than middle-class people. In fact, under the new tax law that tightened rules about itemizing, some middle-income filers have found after giving generously that they were not entitled to itemize.

Compounding the unfairness, charitable "lead" trusts enable individuals to inherit assets tax-free if for some time the interest income goes to charity. Such intergenerational tax-avoidance plans, suffused with the appearance of philanthropic generosity, must be seen for what they are - devices by which a select few receive special treatment at the hands of the law.

The vast majority of non-profit agencies, organizations and programs do important and valuable work. We should not allow defects and peculiarities in our philanthropic system to obscure that fact. But neither should we ignore the system's real inequities. For nearly 10 years, two Republican presidents have extolled the virtues of charity and voluntarism. They have claimed that charity will make up for deep cuts in federally funded human service programs. Before our philanthropic system can take on more burdens in response to Federal cutbacks, it's going to need some fundamental changes.

(Teresa Odendahl is author of "Charity Begins at Home: Generosity and Self-Interest Among the Philanthropic Elite.")