Private foundations have very few legal restrictions. They are required to donate at least 5 percent of their assets every year to public charities—referred to as “nonprofit” organizations. In exchange, the donors are granted deductions, enabling them to reduce their income taxes dramatically. This arrangement enables the wealthy to simultaneously receive generous tax subsidies and use their foundations to impact society as they please. In addition, the process often confers an aura of generosity and public-spiritedness on the donors, acting as a salve against class resentment.
