> I’m not sure how this meme got started

How? Look at multitude of projects and see that most people using the software is not contributing back, with either time, money or anything else.

> Why does free software need funding? Free software needs contributions

You're saying the same thing, "contributions" is one way of funding projects, "funding" doesn't just mean money, it also means contributing engineering hours, security audits or any other way of contributing back.

But without any funding (money, time and/or effort), it's really hard to do security audits for example, since it's expertise many developers don't have nor get to educate themselves about on the job.

How is it toxic to see how little everyone who uses open source/free software is contributing back to the projects they use?

I find that usually there's just one person (or a very small group) with a vision, motivation, and the skills required to take the project in a good direction and keep maintaining it. Contributions from others tend to be fixes and features of limited scope, essentially drive-by contributions, not enough to keep the project going.

Funding would help ensure that those who have the skills and motivation and vision can keep working on it.