Now, MacKenzie Scott is a good a shining example of how to do it. She’s just shoveling it out as fast as she can. Instead of creating some foundation and in perpetuity, she is just got a bunch of smart people around to help her vet whom to get this money to make a more equitable future for the rest, and then also figure out how much money they can handle. Because you can’t just dump $100 million on a small nonprofit. It’ll destroy them just as it would destroy a person. (...)
And for a lot of them, philanthropy is a strategy. It’s part of a whole mix of things like reputation and burnishing tax breaks. How can we give away the right amount of money so it will make us look good, but we don’t really have to give up anything substantial? In Silicon Valley, the big thing is the donor advised funds. It’s like a tiny foundation that is just like a parking place for charitable money, which you put in this account when it’s convenient for you.
When you need to take a big tax break, you put a chunk in this account, and the federal government has no requirements that you have to pay it out at any particular time. Foundations right now only have to pay out 5% of their total assets per year, and that includes overhead. Overhead would include sending your board of directors to Ibiza for a week-long board meeting at a fancy hotel.
So, you could have a foundation that is accumulating money because it’s all invested anyway. It’s just piling on more and more money, and you can keep expanding it and buying new buildings for it. And you could have members of your own family working there at pretty high salaries. What wealthy people get away with are just legion. I know some of them are totally on the up and up and this is a charitable foundation, we want to do good, we’re going to spend it down in 50 years, and that’s great. Congress really blew it when it came to setting up the rules around foundations. As I talked about in the book, John D. Rockefeller first went to Congress trying to get a charter for the first general purpose charitable foundation. Congress was like, forget you, dude. This is back when there was a lot more hostility towards these super wealthy people. Teddy Roosevelt was ripping on him, and people testified that this was just incredibly undemocratic. And it is undemocratic.
So if, let’s say, your marginal top tax rate is 37% on your income, and you give away $100 million, that means 37% of that 100 million is covered by the US taxpayers. If you’re not spending that money on things in the public interest, basically you’re just having taxpayers subsidize whatever your priorities are. And that is another form of flexing power. It’s the opposite of democratic. People will say that the government is a lousy charity and it’s inefficient. That’s true. But the government is not a charity. That’s not its role and not what it is supposed to be doing, and there’s no doubt there are things that private interests can do better and more efficiently, but they can do that without government help.
When you need to take a big tax break, you put a chunk in this account, and the federal government has no requirements that you have to pay it out at any particular time. Foundations right now only have to pay out 5% of their total assets per year, and that includes overhead. Overhead would include sending your board of directors to Ibiza for a week-long board meeting at a fancy hotel.
So, you could have a foundation that is accumulating money because it’s all invested anyway. It’s just piling on more and more money, and you can keep expanding it and buying new buildings for it. And you could have members of your own family working there at pretty high salaries. What wealthy people get away with are just legion. I know some of them are totally on the up and up and this is a charitable foundation, we want to do good, we’re going to spend it down in 50 years, and that’s great. Congress really blew it when it came to setting up the rules around foundations. As I talked about in the book, John D. Rockefeller first went to Congress trying to get a charter for the first general purpose charitable foundation. Congress was like, forget you, dude. This is back when there was a lot more hostility towards these super wealthy people. Teddy Roosevelt was ripping on him, and people testified that this was just incredibly undemocratic. And it is undemocratic.
So if, let’s say, your marginal top tax rate is 37% on your income, and you give away $100 million, that means 37% of that 100 million is covered by the US taxpayers. If you’re not spending that money on things in the public interest, basically you’re just having taxpayers subsidize whatever your priorities are. And that is another form of flexing power. It’s the opposite of democratic. People will say that the government is a lousy charity and it’s inefficient. That’s true. But the government is not a charity. That’s not its role and not what it is supposed to be doing, and there’s no doubt there are things that private interests can do better and more efficiently, but they can do that without government help.
ROBINSON
I read the Wall Street Journal‘s “Mansion” section every Friday, and I’m continuously appalled by excess upon excess. There was a feature in the Times the other day about the increasing cost of high-end toddler birthday parties that can run $75,000 or more now, and they’re getting increasingly complicated. You saw a lot of the really absurd and of how wealth is deployed by people who don’t even know how to spend their money. Could you give us a little insight into the mindset of someone who has spent $75,000 on a child’s birthday party?
MECHANIC
The mindset is that it’s play money and is meaningless to you. That $75,000 could do a wealth of good for some poor families. But instead, we’ll just throw it away here. I think there’s this attitude of “I earned this, and I can use it however I want,” and if it’s frivolous, it’s frivolous. Screw you if you’re going to criticize me because I can do it. You can get whatever you want.
There was a part where I was talking about the Centurion Card, the Black Card, and someone who had one. It’s an American Express card that’s only given by invitation to very wealthy people, or people who spent at least $350,000 a year or something on their credit card. They wanted the actual horse that Kevin Costner rode in Dances with Wolves. And so, they asked the concierge to find it for them. So the Black Card concierge goes and tracks down the horse in Mexico, buys it and delivers it to the guy. Another Black Card holder wanted some sand from the Dead Sea for his child to use in a school project in London. And so, they sent a courier to the Dead Sea, got some actual sand, and had it shipped to London.
These things are just silly. They’re silly, and they’re excessive, but they’re also just a slap in the face of people to people who are hurting and struggling. That’s the other side of it. You can say, this is harmless, it’s their money. But to watch people almost literally burn their money for stupid things and things that people would ridicule them for. Kim Kardashian, in the middle of the pandemic, was Instagramming about how she took all these friends of hers to this island for this getaway so they could pretend things were normal. She’s bragging about this, and everybody else is locked in their houses, out of work and out of school, and people are really suffering. That’s the bubble. That’s pretty distasteful. I would think, even in the bubble, it’s distasteful. It was a clueless move.
by Nathan J. Robinson and Michael Mechanic, Current Affairs | Read more:
Image: Simon & Schuster
