The US government only taxes income, not wealth, and these very rich people have given away billions of dollars. (File Photo: Kelly Sikkema / Unsplash)
Warren Buffett, Elon Musk, Jeff Bezos, and the rest of the 25 richest Americans paid very low federal income taxes from 2014 to 2018 despite amassing wealth, according to Internal Revenue Service data ProPublica obtained from an anonymous source. In a few years, the nonprofit media company reported, these wealthy people were paying no federal income tax at all.
This is not illegal. The US government only taxes income, not wealth, and these very rich people have given away billions of dollars. In many cases, the money they donated to charity helped lower their federal income taxes through charity tax withholding.
The news sparked a debate about the value of charitable giving from America’s billionaires – whether they do good, perpetuate ongoing social problems, or do both. It raises even bigger questions, such as what it takes to create a better world and who decides how to meet the toughest global challenges. As a result, many Americans, including my philanthropy students, are becoming more critical of the billions that the world’s richest people are giving away. In fact, in a recent poll, Americans agreed almost equally on whether the philanthropy of the richest Americans did more good (40%) than bad (36%).
Even some of the super-rich are turning away from traditional forms of giving. Since divorcing Amazon founder Bezos in 2019, MacKenzie Scott has donated at least $ 5.8 billion to around 500 nonprofits. She has placed much more emphasis on social and racial justice in her philanthropy than the other top donors, and generally trusted recipients to spend those funds rather than requiring them to follow her agenda.
A growing number of prominent scholars and activists have been sounding the alarm over billionaire donations, including Megan Ming Francis, Erica Kohl-Arenas and Linsey McGoey. These and other critics target wealthy financiers like Bezos, Facebook’s Mark Zuckerberg, and Microsoft founder Bill Gates, not only because of the tax system that makes it easy for them to amass large fortunes, but also because of the leverage they have in dealing with complex problems solve social problems.
Several books that have been published in recent years deal systematically with these topics, among them “Winners Take All” by journalist Anand Giridharadas, “Just Giving” by Stanford University political scientist, Rob Reich’s “Just Giving”, “Decolonizing Wealth ”by the founder Edgar Villanueva and“ Decolonizing Wealth ”by the writer David Callahan. The donors. “
While these billionaire philanthropy critics may not agree on everything, I see four common themes in their work.
First, philanthropy allows the wealthy to choose how to solve the world’s biggest problems, such as poverty and inadequate educational opportunities. This is a problem, as Villanueva argues, because solving problems effectively requires working with the people you want to help and understanding the challenges they are facing. Similarly, Kohl Arenas and Ming Francis argue that in the past great philanthropists co-opted the social movements they funded and imposed their visions on their fellows.
Second, they say that a broken tax system unfairly subsidizes rich donors compared to everyone else, giving them even more money to decide how to eradicate disease or cleanse the environment. Given the way the tax law works, Bezos could get a $ 390 million tax break for every $ 1 billion he donates. In contrast, a middle-class donor who gives $ 100 to her local grocery bank is unlikely to get any tax breaks for filing her statement.
In fact, as Reich and Callahan point out, the government helps the charities supported by the richest donors more than those supported by the rest of us. As a remedy, Callahan has suggested limiting charitable tax deductions.
Third, mega-donors intervene to some extent in democratic processes. Reich has referred to Gates as “America’s Unelected Headmasters” because of the millions of dollars the Bill and Melinda Gates Foundation has invested in school reform efforts. This giving means that he may have more control over the running of the local schools than the community residents, even though democracy operates on the principle that the people and their representatives should decide how to solve complex social problems.
Fourth, billionaires tend to prefer things that will benefit, or at least not be jeopardized, their own profits. Giridharadas notes that, despite being generous to the 2019 Morehouse class whose student debt the investor was paying off, Robert F. Smith also fought against tax changes that would have made more money available to low-income students to help fund the college to help . All in all, Giridharadas said, Smith’s giving to political and charitable causes could strengthen the status quo and perpetuate income inequality.
Not so quickly, say the philanthropic leaders, who consider this criticism to be exaggerated.
The most prominent defender these days is Phil Buchanan, CEO of the Center for Effective Philanthropy, which researches how foundations work, sponsors conferences, and helps grantors gauge their own performance. In his book, “Giving Done Right,” Buchanan agreed with the critics on some of the sector’s shortcomings. But he also argues that they went too far in dismissing Smith’s gift to the Morehouse students as a stunt.
The advocates of big-buck philanthropy point out that wealthy donors and foundations make a real difference.
They also point out that philanthropy and the charities it funds have long been an integral part of the American approach to problem solving. Among other things, you have protected children, housed the homeless and supported the arts. Critics, they claim, are playing down the important role of private giving – and volunteering – in a country where the voluntary sector accounts for about 5% of the economy and 10% of the workforce.
They also say that critics like Giridharadas are simply unrealistic. They advocate comprehensive tax reform, philanthropy and the role of government in solving big problems. But Buchanan thinks major reforms are unlikely at best. And he fears that this criticism could lead wealthy donors to abandon donation. Meanwhile, he says, “but here we are with wealthy people who want to give back,” arguing that you have to work with the world as it is, not the world you may prefer.
After all, while these defenders of philanthropy are likely to admit that some reforms are needed, they see more good than bad. They want elite philanthropy to be enhanced and expanded, not restricted.
British scholar Beth Breeze, who is currently writing a book on the subject, has stated that she is “concerned about both oversimplifying criticism and careless cheerleading”. She argues that we should view philanthropy as “defensible” because of its “positive potential – which includes improving and saving lives”.
Make everything clear
Using private money to solve public problems raises difficult questions worth fighting over, even when donations are quick and with few conditions, as MacKenzie Scott does.
For anyone trying to understand this debate, I propose that they decide whether the problems of philanthropy can be resolved. When you do this, you are working within the system and trying to improve it. If you don’t, you are joining forces with others to make more fundamental changes.
Editor’s note: The Gates Foundation is a sponsor of the Conversation Media Group. Portions of this article appeared in a previous article published June 5, 2019.
David Campbell, Associate Professor of Public Administration, Binghamton University, State University of New York
This article was republished by The Conversation under a Creative Commons license. Read the original article.