Money gets a bad rap in some quarters. It’s said that it “isn’t everything,” that it cannot “buy you happiness,” that loving it is “the root of all evil.” But if there’s one thing that money is absolutely stupendous at doing, it’s solving problems. Naturally, the more money you have, the more problems you can solve. Which is why the fact that we’ve allowed a large portion of an otherwise finite amount of wealth to become concentrated in the hands of an increasing number of billionaire plutocrats is something of a crisis: Since they have all the money, they call the shots on what problems get solved. And the main problem they want to solve is the public relations problem that’s arisen from their terrible ideas.
Naturally, the ultrarich put on a big show of generosity to temper your resolve to claw back their fortunes. Everywhere you look, their philanthropic endeavors thrive: They’re underwriting new academic buildings at the local university, providing the means by which your midsize city can have an orchestra, and furnishing the local hospital with state of the art equipment. And a sizable number of these deep-pocketed providers have banded together to create “The Giving Pledge,” a promise to give away half of their wealth during their lifetimes. It all sounds so pretty! But as a new report from the Institute for Policy Studies finds, these pledgers aren’t following through on their commitments—and the often self-serving nature of their philanthropy is actually making things worse for charitable organizations.
As the IPS notes, the business of being a billionaire—which suffered nary a hiccup during the pandemic—is booming. So one of the challenges that the Giving Pledgers face is that the rate at which they accrue wealth is making their promise harder to fulfill. The 73 pledgers “who were billionaires in 2010 saw their wealth grow by 138 percent, or 224 percent when adjusted for inflation, through 2022,” with combined assets ballooning from $348 billion to $828 billion.
According to the report, those who are making the effort to give aren’t handing their ducats over to normal charities. Instead, they are increasingly putting their money into intermediaries, such as private foundations or Donor Advised Funds, or DAFs. As the IPS notes, donations to “working charities appear to be declining” as foundations and DAFs become the preferred warehouses for philanthropic funds. (As TNR reported recently, DAFs are a favorite vehicle for anonymous donors to fund hate groups—while also pocketing a nice tax break.) This also has spurred some self-serving innovations among the philanthropic class, “such as taking out loans from their foundations or paying themselves hefty trustee salaries.” More and more of the pledgers are conflating their for-profit investments with their philanthropy as well. And wherever large pools of money are allowed to accrue, outsize political influence follows.
The shell games played by billionaire philanthropists are nothing new. The most common of these are the two-step process by which the ultrarich make charitable donations to solve a problem that their for-profit work caused in the first place. It’s nice that the Massachusetts Institute of Technology’s Institute for Integrative Cancer Research exists, but it’s soured somewhat knowing that the $100 million gift David H. Koch seeded it with was born from a profitable enterprise that included the carcinogens sold by Koch subsidiary Georgia-Pacific. In similar fashion, Mark Zuckerberg’s Chan Zuckerberg Initiative “handed out over $3m in grants to aid the housing crisis in the Silicon Valley area,” a problem that, Guardian contributors Carl Rhodes and Peter Bloom note, Zuckerberg had no small part in causing in the first place.
And at the top of the plutocratic food chain, a billionaire’s charitable enterprise can become a philanthropic Death Star. This week, The Baffler’s Tim Schwab took a deep dive into the Bill and Melinda Gates Foundation and discovered that the entity essentially exists as a public relations stunt to justify Gates’s own staggering wealth. One noteworthy highlight involved Gates reaching out to his upper-crust lessers during the Covid pandemic, seeking additional money on top of the foundation’s own commitment, creating a revenue stream that could tie an ethicist into a knot. “During a global pandemic, when billions of people were having trouble with day-to-day expenses even in wealthy nations,” Schwab asks, “why would an obscenely wealthy private foundation start competing for charitable donations against food banks and emergency housing funds?”
As the IPS study notes, perhaps the worst aspect of all of this is that ordinary taxpayers essentially subsidize these endeavors: According to their report, “$73.34 billion in tax revenue was lost to the public in 2022 due to personal and corporate charitable deductions,” a number that goes up to $111 billion once you include what “little data we have about charitable bequests and the investments of charities themselves,” and balloons to several hundreds of billions of dollars each year “if we also include the capital gains revenue lost from the donation of appreciated assets.”
The IPS offers a number of ideas for reforming the world of billionaire philanthropy to better serve the public interest. There are changes to the current regime of private foundations and Donor Advised Funds that would ensure that money flows to worthy recipients with greater speed and transparency. Regulations could ensure that such organizations aren’t just another means by which billionaires shower favors on board members—and that would give foundation board members greater independence to act on their own ideas and prevent the organization from being used as one rich person’s influence-peddling machine. But for my money, the one way we could solve this problem is to institute one of the most popular policy positions in the history of the United States, and tax the rich to the hilt.
This article first appeared in Power Mad, a weekly TNR newsletter authored by deputy editor Jason Linkins. Sign up here.