If you were awake during the wee hours of the morning you would have been witness to a major event: 2:22 on 2/22/22. We won’t see that again. But when our children or grandchildren do 100 years from now, assuming our planet survives, is there any chance they’ll look back fondly on the wealth hoarders, whether they be individuals or foundations? I think not.
Decades of misguided tax and economic policies have left us with the mess we call wealth inequality. There are many steps we can take to avoid the mistakes of the past and slow the accumulation of excessive wealth fix what exists now the choices are limited: for individuals, it’s meaningful wealth and estate taxes alongside public pressure to give more money to charity; for foundations, it’s increased payout requirements (unless someone thinks a wealth tax on foundations is within the realm of possibilities).
So it discouraging that the Chronicle of Philanthropy published its Philanthropy 50 that touts big charitable gifts in absolute rather than relative terms and allows money being parked in foundations and donor advised funds (DAFs) to be counted.
In a year in which, according to Americans for Tax Fairness, billionaires increased their net worth by $1 trillion (that’s a thousand billions) only five billionaires gave more than $1 billion in 2021. Alison Powell, a partner and philanthropy adviser at the Bridgespan Group, said “It’s really surprising that giving hasn’t expanded more.” Surprising? It’s pathetic. There are nine men (no women) in the U.S. who have over $100 billion each. One percent, $1 billion, wouldn’t even be stoop change for them.
Bill and Melinda Gates made the list by giving $15 billion to their foundation–when will nonprofits see that money? Hedge-fund manager Bill Ackman and Mark Zuckerberg also made the list by giving to their foundations, and most likely so did Elon Musk, although the beneficiary of his largesse is so far undisclosed.
In last month’s Letter, I used hypothetical examples to illustrate what is wrong with charitable tax laws with respect to billionaires. Musk provides us with a real world example. The first question is why should Musk need or get a charitable tax deduction all? And how much power does that nearly $6 billion gift give him? Will it be used to address poverty, economic inequality, threats to our democracy, or will it simply be a way to spread his name around, given in one big chunk or in bite-size $50 million naming opportunities (“Muskitos”).
Of course, if there is any naming right associated with his gift, it should be the U.S. Treasury. One can reasonably assume that Musk will get a federal income tax charitable deduction of approximately 40% a California income tax deduction of approximately 11% and avoidance of capital gains tax on the appreciated value of the charitable gift of approximately 24% for a total savings of 75%! In other words, a gift of $6 billion will have a net cost to Musk of $1.5 billion and a net cost to the U.S. Treasury of $4.5 billion. The taxpayers don’t get to vote on where that money should go. One guy does. And that’s plutocracy.
The Chronicle notes that 86% of the funds contributed by the major donors on their list went to private foundations and donor-advised funds, colleges, universities, and hospitals, not to efforts to reduce inequality, support democracy or promote racial justice. As Chuck Collins, director of the Program on Inequality and the Common Good at the Institute for Policy Studies, said, “This gift list is completely disconnected from the reality of our society right now.”
Of the five donors who gave a billion, only Michael Bloomberg seems to have given his $1.7 billion to charities, about 10% of the amount his assets increased in 2021. The gifts represented about 2.5% of his wealth, half of what he would need to give to meet CCC’s charitable standard.
Meanwhile, a tweet has apparently been making the rounds:
“Sadio Mane, a Senegalese soccer star, earns approximately $10.2 million annually. He gave the world a rude awakening after some fans were flabbergasted when they saw him carrying a cracked iPhone 11…. ‘Why would I want ten Ferraris, 20 diamond watches, and two jet planes? I starved, I worked in the fields, played barefoot, and I didn’t go to school. Now I can help people. I prefer to build schools and give poor people food or clothing…. In addition, I give 70 euros per month to all people from a very poor Senegalese region in order to contribute to their family economy…. I prefer that my people receive some of what life has given me.”
What more can I say?