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Max King Fires Back

September 13, 2007

Maxking_0123It took a week, but someone from the foundation world has decided to respond, in public, to Stephanie Strom's long (2,100 words), front-page article in last Thursday's New York Times ("Age of Riches: Big Gifts, Tax Breaks, and a Debate on Charity," Sept. 6). In her article, Strom suggests that while the rich are giving more to charity than ever, the "bill for such generosity" may be too high, given that "the federal government typically gives up a dollar or more in tax revenue, because of the charitable tax deduction and by not collecting estate taxes," for every three dollars donated to charity.

In classic "he said, she said" style, Strom posits "a growing debate" over the value of the tax break for charitable deductions, with L.A.-based philanthropist Eli Broad speaking for the status quo and billionaire bond investor Bill Gross cast as the gimlet-eyed accountant. The public benefit of the charitable deduction, Broad says in the article,

is significantly greater than the tax benefit an individual receives. I think there’s a multiplier effect. What smart, entrepreneurial philanthropists and their foundations do is get greater value for how they invest their money than if the government were doing it.

To which Gross, a genius at making money but not, the last time I checked, a pollster, "replies":

I don’t think we’re getting the bang for the buck for gifts to build football stadiums and concert halls, with all due respect to Carnegie Hall and other institutions. I don’t think the public would vote for spending tax dollars on those things.

In the article, Strom seems to equate the public benefit test with the "common perception" that one of philanthropy's "central purposes"

is to alleviate the suffering of society’s least fortunate and therefore promote greater equality, taking some of the burden off government.

"In exchange," she adds,

the United States is one of a handful of countries to allow givers a tax deduction. In essence, the public is letting private individuals decide how to allocate money on their behalf.

That notion, says Maxwell King, president of the Pittsburgh-based Heinz Endowments and current chair of the Council on Foundations, is "just plain silly." Big-government initiatives, writes King in a letter to the editor in today's Times ("Private, Efficient Charity," Sept. 13), "are all too frequently done in by intransigent bureaucracies, wasted resources and politicized management." In an age that celebrates the "value created by entrepreneurship, innovation and competition," King adds,

It is no stretch to suggest that the nation benefits as well from the inventiveness and creativity of a private philanthropic sector that uses all its resources — the 75 percent from donors and the 25 percent from foregone taxes — more entrepreneurially and effectively than big government ever would.

What do you think? Is there a growing debate over the benefit the public receives from private philanthropy? And does the philanthropic sector use its resources more entrepreneurially and effectively than government?

-- Mitch Nauffts

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Posted by Phil  |   September 13, 2007 at 04:05 PM

Nice post. Informative and balanced. Wonder what Bill Gross gives these days, how and to what.

Posted by Suzanna  |   September 25, 2007 at 02:48 PM

It would be interesting to compare Strom's numbers ($1 of tax revenue lost for every $3 donated) against how much tax revenue is lost through the mechanisms in corporate tax law that allow corporations so many deductions that benefit only themselves, and not the public. I suspect that the government's concerns about lost revenue might better lie in that direction...

Posted by John C McGee  |   October 01, 2007 at 03:12 PM

I am sure one can find numbers to justify positions on either side of this discussion. To me the more important question is what roll nonprofit organizations should have in 21st century America. The nature and financing of many of these organizations have changed considerably if not drastically as a result of the “Reagan revolution” of the 1980’s. Consequently until there are some reasonably accepted expectations for what the sector should and could do, arguing over who (the government or nonprofits) is more efficient or generates better return on investment is academic. Both have there strengths and weaknesses. But utilizing them to solve societal and community needs efficiently depends upon some collective agreement as to what one should expect from the sector in question.

Now, that the debate is heating up, would be a good time to convene a broad based effort to address those and other questions that are being raised by Congress, the member and members of the philanthropic and corporate communities. This effort should include all the stakeholders and use as a jumping off point the findings of the Filer Commission and the completed reports of the Panel on the NonProfit Sector.

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