MacKenzie Scott rocked the philanthropy world recently with a blog post on the website Medium. Ms. Scott had committed to being aggressively charitable following her divorce from Jeff Bezos in 2019, and her latest round of grants, totaling $2.7 billion, brings her donations over the last 11 months to more than $8 billion. Nationwide, charitable donations rose 5% in 2020 according to a report by the Giving USA Foundation, to a record $471 billion. That’s a stunning number, equivalent to 14% of federal government revenue from taxes, tariffs and other sources.

Is there such a thing as excessive philanthropy?

For 10 years the U.S. has topped the World Giving Index, a report compiled annually by the Charities Aid Foundation. This report uses surveys to gauge three dimensions of giving: helping strangers, donating to charities, and volunteering with an organization. U.S. scores have been declining for several years, but still register at 72%, 61% and 42%, respectively, for an overall average of 58%.

The influence of culture on philanthropy is profound. Myanmar, where Buddhist traditions drive the highest score for donation activity (81%), earned the second highest Giving Index rank. Russia earned an overall score of 21% and ranked 117th. China ranked 126th, the bottom of the survey, with an overall score of just 16%.

Our culture strongly endorses philanthropy. Tax policies incentivize the charity economy by providing tax- exempt status to non-profit organizations and by granting tax deductions for charitable donations.

Historically, religious groups and private organizations in America harnessed charity to battle social problems well before the creation of equivalent government programs. Increasing federal funding of Faith Based Organizations (FBOs) was a policy goal for President George W. Bush, and by 2007 FBOs received 11% of federal social services grants. Even after President Clinton approved laws clarifying that FBOs could not impose religious criteria or discriminate in the administration of such programs, the delivery of taxpayer funded services by faith groups has remained controversial.

Critics say social service programs should be publicly administered, and that relying on philanthropy rather than government to provide those services results in funding volatility and coverage gaps.

The upheaval of 2020 makes it an interesting data point in this debate. by corporations declined 6%, thanks to the Covid-driven economic slump. While millions of Americans also struggled with lost income due to Covid, a surging stock market stimulated giving by the affluent, pushing donations by individuals up 2%. Bequests from estates, which are also correlated to the market, increased 10%. Giving by foundations increased a whopping 17%, to a record $89 billion, since foundations are obligated to disburse at least 5% of their assets annually in order to retain their nonprofit status.

Is America excessively reliant on the charity economy? Ms. Scott’s journey into mega-philanthropy may offer some insights.

In 2019 Ms. Scott’s divorce settlement included 4% ownership of Amazon, worth $36 billion. Since that time, she has donated more than $8 billion to 786 organizations, primarily through direct gifts. That is mighty admirable philanthropic giving. And yet, thanks to gains in Amazon stock, Forbes estimates her current net worth at $60 billion.

Some of Ms. Scott’s contributions are made through a donor-advised fund, a vehicle the Biden administration reportedly wants to eliminate. Donations to these funds earn an immediate tax deduction equal to the amount contributed (capped at 30% of adjusted gross income for securities and 60% for cash contributions). However, the contributor retains control over when and where distributions to charities actually occur. Contributions can be bundled into one year to maximize the tax benefit, while the charitable distributions trickle out over subsequent years.

Philanthropic giving is laudable, but it is deeply intertwined with tax avoidance behavior. Legal structures like donor-advised funds are intended to maximize tax reduction benefits for the wealthy. A February poll conducted by the website Vox suggests that a majority of Americans believe higher taxes on the wealthy would be more beneficial to society than more donations from the wealthy. In addition, 33% of respondents did not agree with the statement: “billionaires do a good job of giving away their money.”

Billionaire Warren Buffet recently announced $4.1 billion in charitable donations, bringing his lifetime total to $41 billion. While acknowledging that philanthropy can be a powerful tax shield, Buffet said his latest donations generated only 40 cents in tax savings per $1,000 given. A longtime critic of dynastic wealth, Buffet also said “it is fitting that Congress periodically revisits the tax policy for charitable contributions.”

Excessive reliance on philanthropy to address social problems can actually exacerbate wealth inequality. As Ms. Scott stated “it would be better if disproportionate wealth were not concentrated in a small number of hands.”