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The Philanthropy Paradox

May 11, 2014

A lengthy BloombergBusinessweek post, “The $13 billion Mystery Angels“, describes the efforts of three philanthropists to use elaborate means of shielding their identities from the public and a lengthy description of how the philanthropists made their fortune through the use of complicated arbitrage schemes. While the descriptions of the methods used to raise money and hide their identities was interesting, the most astonishing fact about philanthropy was buried in the middle of the article:

Because Congress offers tax deductions for philanthropy, this growing breed of donor is deciding the fate of billions of dollars that would otherwise flow to the government. Individual charitable deductions will cost the Department of the Treasury $43.6 billion in foregone revenue this year, a congressional panel estimates. Partly because of the tax subsidy for philanthropy, the IRS has long required private foundations to publicly state who controls and funds them. This is fine with most big donors, who don’t want to hide their gifts. They want recognition or a legacy, or they want to help publicize their cause… By masking their philanthropy, they aren’t just shunning accolades and speeches at charity galas. They’re also avoiding public scrutiny of how they made their fortunes, and how they’ve chosen to give them away, including some donations with political consequences.

This means that in one year philanthropists received tax credits worth 10 times the TOTAL amount allocated for Race To The Top! Now some of the philanthropists donated funds for worthy causes. It’s difficult to argue against Bill Gates’ decision to fight polio, and this article describes several donations that are equally beneficial. It also described some political donations they made: some to causes that I would wholeheartedly support.. but some that are a cause for concern. But these tax credits give the Gates, the Kochs, and these anonymous donors tremendous power. IF Bill Gates spends millions promoting the Common Core and computerized tests based on the Common Core, he is directing the course of public education far more than the Federal Government. And Gates’ advocacy of computerized testing does not seem purely charitable even if his intentions are pure. And if one of the donors is giving huge sums to fight Huntington’s disease, a relatively rare malady, while the government proposes cutbacks to the CDC, is that the best use of money?

Because we have adopted the belief that “Government is the Problem” we have directed more and more money away from government agencies who need funds to fight disease, who need resources to feed, clothe, house and educate poor children, and who need resources to maintain and expand our infrastructure. The result of this is the placement of more and more money in the hands of fewer and fewer individuals… and with the transfer of money we are also transferring the decision making and prioritizing of needs to that same group.

I would prefer to have our democratically controlled government making decisions about how to spend $43,600,000,000 instead of leaving that decision in the hands of an ever smaller group of oligarchs…. but then I DON’T believe government is the problem.

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