The Third Act of American Philanthropy

In philanthropy, the arrival of a new wave of wealthy individuals is inevitably heralded as a “new epoch” for the sector. The latest to be so named comes from the claim that we’re experiencing a “third wave of American philanthropy.” A fresh set of rich people is arriving with AI-inflated net worth, and we’re asking the same recycled question: How can we distribute this money effectively?

That question is a distraction. It leads us to speculate about how we capitalize on the next wave of a poorly designed system, one whose institutional structures haven’t changed in over half a century. Instead, we must fight for reforms that lead to institutional philanthropy’s third act – an end to the field as we know it, where we no longer need foundations and are free from billionaire influence. 

My passion for a philanthropic third act is not a polemical performance. It is grounded in real experience. As an education grantmaker, I have witnessed how private philanthropy has controlled, shaped, and slowly bled our public school systems, and I am alarmed by the state of public schools in the United States.

In 2026, my home state of Texas experienced an enrollment decline of 76,000 students—the first non-pandemic decline in nearly four decades. This trend is national, impacting districts from Florida to California. While educators have long anticipated an enrollment cliff due to America’s changing demographics, an initial “post-mortem” also points to another group of philanthropically- backed culprits: The school voucher movement and charter schools, which respectively skim both higher- and lower-income students from public schools. The backers of the aforementioned initiatives are a broad constellation of familiar names like DeVos, Walton, and Gates.

More egregious is the compendium of tax benefits and loopholes that divert funds from our already anemic school systems, and from public systems writ large. As Ray D. Madoff argues in her book The Second Estate, this foregone revenue from charity-driven tax benefits means less money “for the public benefit or to pay down the national debt or even to reduce tax burdens for others…with tax benefits, [wealthy donors] are giving away the American taxpayers’ money.”

This is all by design.

The absurdism of institutional philanthropy is well-trodden territory. We know the irreconcilable logic of using wealth derived from economic inequality to solve economic inequality itself. Despite decades of debate, the last major U.S. attempt to federally regulate private foundations was more than 50 years ago.

In 1969, Congressman Wright Patman led calls to reign in tax laws around philanthropy, because as he said at the time “the cream [slipped] out of our tax system as the great fortunes go into tax-exempt foundations.” The resulting Tax Reform Act banned self-dealing, tightened governance rules, and set a 5% minimum payout. But the law proved pallid: rather than curbing institutional philanthropy, it entrenched the field's permanent role in American life. 

Without major reform, we remain caught in the same cycle: Communities experience the same resourcing gaps year after year, while foundations can leverage their assets and investments to operate in perpetuity. That permanence was not an aberration of the 1969 reforms, it was an intentional feature. 

To be clear, we have made a choice to engage in this endless loop. The great irony of the philanthropic field is that we are eager to shape the policies of other fields, but not our own. Although the IRS generally prohibits private foundations from activities that influence legislation, there is one exception: self-defense. We can lobby for and against our existence, our oversight, our authority. 

The precarity the system perpetuates has reached the breaking point. Despite tremendous federal cuts in 2025, the field-wide payout in the philanthropic sector only increased 2%. The broader world has taken note of philanthropy’s inertia: According to a 2024 Ipsos poll, 83% of Americans believe that taxpayers shouldn’t have to subsidize the wealthy to create “permanent legacy foundations.” These consequences are the result of conscious choices made across the field to protect ourselves.

We must be as bold in our willingness to change as we are in our fabled theories of change. 

First, our collective conversation in philanthropy must be driven by deeper reflective inquiries. We must ask better questions—to think beyond “How do we give better?” or “Who do we give money to?” These questions are shallow north stars with answers that put us in a holding pattern for change. Instead, I challenge our field to move toward philanthropy’s third and final act by asking: 

• How can we fund the liberation of communities so that they are not subject to the whims of a few? 
• How can we move beyond practices into actual policies and systems change, something we ask our grantees to do all the time? 

Next, we must take collective and concrete action, drawing on lessons from other abolitionist movements, such as prison abolitionism. Reform and abolition are not opposites, but overlapping partners in social change. Political theorist Andre Gorz called this “non-reformist reforms,”  reforms that create intentional “cracks” in power systems rather than make them more palatable. Applied to philanthropy, this means holding a long-term vision of the field's end while, in the present, pursuing reforms that shrink its breadth rather than expand it to absorb the next wave of wealth. 

We must widely reject the idea that wealth-driven institutional philanthropy is an appropriate response to economic inequality and the right vehicle for increasing public good. On a policy level, what this looks like is hacking away at the key pillars of the Tax Reform Act of 1969, which focused on preserving the wealth of foundations versus the long-term wellbeing of communities. Some ideas that have been pitched across the sector include, but are not limited to:

• Increase the minimum payout from 5%. Based on the average field-wide payout, each percentage point increase translates to roughly $16 billion dollars back to communities.
• Remove Program Related Investments (PRIs) and Mission Related Investments (MRIs) from the payout threshold. These initiatives are often loans to organizations, wherein the money returns back to the coffers of the foundation.
• Stipulate that the 5% payout calculation can only be met with grants and not foundation “overhead” expenses such as staff salaries and so-called “Direct Charitable Activities” like evaluation vendors.
• Change the timing of tax deduction to after grants are issued.
• Classify opaque Donor Advised Funds—a growing charitable vehicle of the ultrawealthy—as “private foundations” subject to the same regulations as all other private foundations.

None of this can be a one-off. Each win must be a part of a roadmap for the next set of reforms that will eventually end tax-exempt foundations once and for all.

Finally, philanthropy’s “third act” cannot happen in isolation. Private foundations are just one vehicle in the broader portfolio wealthy individuals use to influence society. Take as one example Google founder Sergey Brin, whose net worth exceeds $250 billion dollars. Alongside private ventures, he gives to Google’s corporate charitable arm, his own family foundation, a 501c4 entity, and Political Action Committees, while Alphabet’s lobbying further increases the wealth available to these influence operations. Brin’s giving is not unusual. It reflects a broader pattern among the ultra wealthy, regardless of political affiliation.  

Pursuing non-reformist reform of institutional philanthropy must therefore go hand in hand with efforts to address billionaire influence more broadly. Philanthropy should invest in the growing movement for equitable tax and revenue policy, including the movement of organizations fighting for equitable tax and revenue solutions. If foundations are serious about building a more equitable society, they must take taxation seriously. And if our field truly centers community voices, we should heed the public’s call for fairer taxation. Taxing corporations and the ultrawealthy is one of the most popular contemporary political issues. This movement spans efforts to define wealth beyond income, reshape public budgets, and build more democratic systems of resource allocation. It moves us beyond How do we give better? toward a more fundamental question: How do we address our challenges collectively and democratically, without relying on the preferences of billionaires? 

Ultimately, a philanthropic "third act" should mean not simply giving differently, or making philanthropic institutions more permanent, but working toward a world in which philanthropy is less necessary. Our funding strategies will never fully materialize without structural policy change, and our internal struggles are inseparable from the lagging regulation of our own field. Education, the field I know best and the U.S.'s third-largest area of philanthropic investment, offers a clear example: The dreams of scale and systems change that philanthropy so often pursue already exist in our public schools. Rather than building parallel systems indefinitely, philanthropy should invest in the institutions communities already rely on. 

Then exit stage left.

A "third act" should be more extraordinary than the next dawn or wave. It's not just an end, but the breaking of an old narrative pattern—and the beginning of something truly new.

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Jennifer Thuy Vi Nguyen is a writer and director at a foundation in San Francisco.