It’s that time of the year. On November 7, the New York Times launched its ninety-ninth Neediest Cases Fund campaign. Three days later, in an article headlined "The rich are different from you and me. They give more," reporter Jan Rosen summarized the latest Bank of America Merrill Lynch study of "High Net Worth Philanthropy," which, like previous studies, praised the wealthy for their generosity (though noting that, in 2009, they gave a median of just 3.4 percent of their income to charity). In a second "Giving" article published that same day, Stephanie Strom discussed the status of the "Giving Pledge, a commitment by 40 of the wealthiest Americans to give away at least half of their fortunes, about $600 billion."
Queried on the "emerging debate" the pledge had stimulated "about the influence that wealth has in the country today and the fears that philanthropy is being used to bend public policy," Strom noted that pledge signers like Bernard Marcus, co-founder of Home Depot, were dumbfounded by it. "All this money is going for charity to help people—what kind of numbskull would find something wrong with that?"
Pardon me for acting the Grinch in this "giving" season, but I feel obligated to call attention to the fact that under current federal tax codes almost all of those who give (and itemize their deductions) are eligible for and receive a tax deduction of up to 35 percent. When Mr. and Ms. Rich Alumni make a $1,000 contribution to their private university, or to their church, or to fix up the park across the street, or to subsidize the concert hall they patronize, it costs them only $650. The remaining $350 comes from the taxes they would otherwise have had to pay on that $1,000. I’m delighted that Harvard was able to raise $596 million last year, but if we assume that most of it came from those in the highest tax bracket who itemized their deductions, that $596 million breaks down to about $387 million from the donors and $209 million from the Treasury in forgone tax revenues.
In early 2009 the Obama administration proposed a decrease from 35 percent to 28 percent on the top rates for deductions for mortgage interest and charitable donations, claiming that this adjustment would generate $318 billion in taxes over the next ten years to help pay for healthcare reform. The suggestion was no sooner voiced than it was killed by Congress after withering criticism from both sides of the aisle. The outcry about messing with the charitable tax deduction was particularly raucous. The charitable deduction has become so sacrosanct that not even President Obama’s bipartisan debt-reduction commission—which has called for limiting or eliminating mortgage-interest deductions—dared suggest any comparable adjustment to the rates for charitable deductions.
The philanthropic sector, fed in part by the charitable deduction, has grown beyond all expectations in the past quarter-century. So too has the influence it wields over public policy. In 2009 charitable giving totaled more than $300 billion, or 2.1 percent of the GDP. Though Bill Gates and Warren Buffett have become the beneficent faces of twenty-first-century philanthropy, foundations like theirs account for only about 13 percent of total giving. In 2009 fully 83 percent, or more than $250 billion, was given by individuals and estate bequests. Some 70 percent of this total came from the 3.1 percent of Americans with incomes greater than $200,000 and/or assets exceeding $1 million.