“When Philanthropy Goes Bad ” June 25, 2023 Dr. Roger Ray
Chris Winters: Good-hearted philanthropic foundations make news headlines when they funnel millions of dollars into charitable causes. Even smaller foundations make a splash when they lend their support, such as when the Landfall Foundation of Wilmington, North Carolina, stepped in early to distribute $388,000 to 82 local nonprofit organizations and schools after Hurricane Florence. But that’s not the whole story. In fact, it’s only about 5 percent of the story.
We seldom hear about the really, really big money: philanthropy’s own investments. Federal law requires that foundations give away 5 percent of their endowments each year. The other 95 percent is typically invested in Wall Street markets to sustain and increase the philanthropic pot.
According to the Foundation Center, about 86,000 charitable foundations hold more than $890 billion in assets. In 2015, they gave out a total of $62.8 billion, averaging 7 percent across the industry. What to do with the rest of that money—$827.3 billion—has presented both problems and opportunities.
https://www.yesmagazine.org/issue/good-money/2018/11/27/your-favorite-charity-has-most-of-its-money-in-wall-street
I have been the beneficiary of charitable philanthropic giving for my entire life. I grew up in a home where both parents worked. My father worked for the electric company and my mother was our church’s secretary, drawing her salary from donations made to our church. In college, I received scholarships from non-profit organizations, grants from charitable endowments, and my grad school was a non-profit private university.
Of course, as a pastor, my salary has derived entirely from donations, some of which have been gifts from charitable endowments. Even now, some of our largest donations come from the mandatory distributions of endowments. Endowments are required, by federal law, to distribute at least 5% of their holdings every year.
You cannot donate a million dollars to a foundation and then just let it accumulate money without ever actually doing anything charitable with the money. But, of course, 5% is a fairly low bar. What is done with the other 95%? The donor of the one million dollars gets to write off 100% of their donation while as little as 5% of it will be given to a charitable cause that year.
Today I am delivering the first part of a two-part sermon about philanthropy. Next week I want to talk about how much good comes from the generosity of people who make sacrificial donations but today I feel the need to talk about something you may have never heard anyone say anything about, which is the down side of capitalism and tax avoidance that masquerades as philanthropy.
Of course, we all hear about the huge foundations, like the Bill and Melinda Gates Foundation which does innovative work in many charitable fields all around the globe. Most of those news worthy efforts warm the cockles of my heart! Who doesn’t love it when really rich, very smart people try to take on noble objectives without using tax money to do it?
What we almost never talk about is what they are doing with the money they are not distributing to philanthropic causes? Of the $50 billion in the foundation, most of it is invested in profitable stocks, at least some of which is earned in very questionable fields. Buying Walmart stock, when most of us who are concerned about the wage gap, the distribution of slave manufactured goods, and other questionable aspects of Walmart’s corporate practices avoid even shopping there, let alone buying a couple of billion dollars worth of their stock.
And even more complicated, there are those on the receiving end of the foundations charity who have alleged that some of the health care products and devices promoted by the foundation actually end up enriching Bill Gates. Last summer, South African journalist, Patrick Bond, wrote that exploitation often comes to Africa disguised as charity, specifically because of Bill Gates’ “own orientation to profiting from ‘false solutions’ instead of promoting serious solutions.”
https://www.cadtm.org/Philanthrocapitalism-seen-from-South-Africa
Our tax system, which is intended to raise the money that it costs us to have a government and a civilization, allows for deductions for those who are wealthy enough to make large donations to charities. By doing this, they are avoiding paying taxes that pay for schools, hospitals, roads, fire departments, our military, our national parks, and everything else, because we are entrusting them to do good and needed things with that money.
I don’t want to complicate this sermon with too many charts and economic numbers but please allow me to remind you that a third of the wealth in the USA is owned by the top 1% of our population. The lower 50% of our population only owns about 2% of our nation’s wealth.
The rich and the poor pay the same percentage in sales tax and most usage taxes, which is why any proposed federal “flat tax” is the most regressive form of taxation possible. So, when you talk about who shoulders the nation’s tax burden, you can’t just talk about income tax, you have to look at sales tax, property tax, and all of the other fees that are hidden in the gasoline and tires we buy, and the subsidies given to certain industries that unequally serve the public’s interests.
The majority of income tax revenue does come from the wealthy but looked at as a whole, the poor are still carrying a disproportionate share of the load, in part, because the wealthy can avoid paying taxes by making charitable donations. The tax dollars they do not pay then gets shifted to the lower end of the income spectrum for people who don’t make enough to deduct donations.
I’m not wanting to tar all such foundations with the same brush and I don’t even want to imply that the Gates foundation is more harmful than good; I suspect that they are probably a lot more good than they are bad but you can see the weaknesses in the tax system that tremendously benefits the rich at the cost of the poor and middle class.
Warren Buffett, one the richest people in the world who also does a lot of philanthropic work, donates billions to the Gates’ Foundation but it deserves to be said that he has a condition on his gifts that stipulates that whatever he gives to the foundation must be distributed in the year that it is donated. Buffett doesn’t want his money becoming a part of the 95% that is invested by the foundation and that, I believe, should be informative to the rest of us.
If our tax system allows you to deduct 100% of your gift, then the gift should go to good causes and not be primarily invested in corporations that benefit stock holders because too often that becomes a form of exploitation masquerading as a charity.
I served on the board of our local Community Foundation which now manages more than $400 million. I resigned from the board when it became evident to me that the stated goal of the foundation, of providing grants to worthy non-profit causes in our area, had become secondary to growing the holdings of the foundation. When a former member of the church I served at the time, left the foundation $2 million dollars for the general welfare of the community, rather than putting that money into the undesignated funds which allowed us to help start up and struggling non-profits, they used that $2 million dollars as match funds to draw more donations to the designated funds whose grants were directed to the personal interests of those named funds. What they did was legal but, running the risk of over stating my case, everything that Hitler did during the Holocaust was legal but that doesn’t make it right.
I voiced my objections to this use of the $2 million dollars and yet, when we voted, I was the only one who voted to keep it for what it was donated for, the benefit of the poor, while everyone else voted to use it as matching money to draw more money into the foundation’s holdings…. Which allowed them to pay more in salaries and build a larger headquarters building. They said nice things about me as I left, you know, the way they do with preachers, they applauded my convictions while entirely ignoring the point.
And, again, let me emphasize my heart-felt belief that our Community Foundation does a lot of good, not as much as they could but I would not say that their decision in this case that led to my resignation from the board was evil but if you said it was “evil adjacent” I couldn’t really disagree with you.
Still, I should qualify that by saying that over the past 30 years I have resigned from most of the non-profit boards in town except for the ones they would never allow me to be on, and, yes, I am talking about our two regional hospitals.
I have always found it to be entertaining when people advocate for taxing churches, but they never seem to mention the non-profit status of our hospitals which are busy buying up the most expensive real estate in the area, removing said properties from the tax role, to build more and more buildings, and paying their executives larger and larger salaries…. Which is, now that I think of it, why I was never invited to serve as a hospital trustee. There are some pretty big churches around here but compared to the hospitals, their tax scam hardly deserves a mention.
However, religion has its own inside secrets. If you don’t recognize it, this is the Museum of the Bible in Washington, D.C. It is situated near the Smithsonian campus to give the impression that it is the same sort and quality of collection as the internationally respected Smithsonian. It is, however, not what it pretends to be. It is the brainchild of the very wealthy Greene family, the owners of Hobby Lobby and other retail businesses. The very right wing religious fanatics came up with this project and have leveraged it to gain notoriety in the religious world and even an audience with the pope…. Pope Benedict, not the current pope who models himself after St. Francis. Benedict modeled himself after Christians who own private jets, but I’ll leave that alone for now.
The scholar the Greenes hired to curate their acquisitions for their museum was a friend of mine. A top scholar who was uniquely equipped to be able to tell their difference between forgeries and actual ancient manuscripts that the museum wanted to acquire. To avoid possible litigation, I want to say very clearly that I don’t know that what I am about to describe actually happened. I am just saying that our tax laws are so screwed up that it could have happened.
I don’t know that they did it, but as a hypothetical, the Greene family might have located an purchased an ancient scroll from some obscure Middle Eastern monastery for, let’s say, $100,000. And then they had the scroll appraised at a place like Christie’s Auction House for $10 million dollars. Now, in this entirely hypothetical scenario, when the Greenes donated this scroll to their Bible Museum, do they get a $100,000 tax deduction, what they actually paid for the scroll, or do they get a $10 million dollar deduction? If such a horrible thing had happened, the super-rich family could avoid paying over $3 million in taxes, leaving the dirty task of paying taxes to, well, you.
I’m not sayin’ it happened, I’m just sayin’. Under the guise of evangelical Christianity, under the guise of open-handed philanthropic generosity, the wealthy can avoid paying millions of dollars in taxes but then, who does pay for the roads, the schools, the Veterans’ benefits, Medicaid, and park rangers?
I’ve taken you into the weeds today to tell you about an injustice that affects you in your wallet, an injustice that I suspect most of you never knew about. And it is arguably unfair if not unkind to even tell you about something that you can’t do anything about except for the fact that you get to vote for the people who write the tax laws and if you vote for people or parties that consistently write the tax code in a way that provides loop holes for the rich who shift their tax bill onto you and your children and your grandchildren then, dear friends, you have no one to blame but yourselves. It is not new news that the rich can be greedy and that they will likely exploit every opportunity legally given to them to avoid paying the freight for running the democracy that has allowed them to become obscenely wealthy.
I’m not saying that we should eat the rich, but I am saying that we should fight against an unjust economy that famous Catholic workers advocate, Dorothy Day described, saying: Our problems stem from our acceptance of this filthy, rotten system. So, dear friends, stop accepting this kind of exploitation as being inevitable. To quote my favorite musician, Bruce Cogburn, “We have to keep kicking at the darkness until it bleeds daylight.”
Don’t vote for fascists and please, don’t shop at Hobby Lobby.
