A group of 40 American billionaires have pledged at least half their fortunes to charity as part of a campaign by the financier Warren Buffett and Microsoft founder Bill Gates.
Isn’t that just lovely?
Mr Buffett has promised to donate more than 99 per cent of his estimated $47 billion (£30 billion) fortune and is giving most of it in annual instalments to the Bill & Melinda Gates Foundation.
The important word there is “most”.
For while Mr. Buffett has indeed made a very large indeed donation to that Gates Foundation, he’s also made a very large one indeed (although not quite so large) to a more traditional family foundation. Some $6.7 billion if memory serves me correctly.
And why does this matter? Well, it helps to explain the first part, all these billionaires willing to donate to charity. For such family foundations allow the cash to be put into them tax free. And then the cash can be invested attracting no tax on any returns to it over the generations. Subject only to paying out 5% of assets (I think I’ve got that right) each year in charitable works. Such 5% can be made up of paying family members to administer the trust…..
Which is why Joe Kennedy left his money to a series of family trusts, the Hewletts, Packards, Fords, Rockefellers and so on.
Leaving the money to a “charity” is in fact the American way of making sure that a) no tax is paid on it and b) that the heirs cannot piss away the capital.
So, given that the traditional Amercian manner of making sure you keep the money in the family is to give it to a charity the news that 40 billionaires have been presuaded to leave their money to charity really isn’t all that surprising. Nor is it really something that might have taken a great deal of persuasion to bring about.
Jim Glass has a great piece on this somewhere in his archives.
Update: It’s The Guardian that manages to raise this important point:
Pablo Eisenberg, a senior fellow at the Georgetown Public Policy Institute, at Georgetown University, Washington DC, said ultra-wealthy donors tend to give money to higher education, arts and established healthcare causes, with relatively little going to poverty reduction, disability causes or to disadvantaged ethnic minority communities. Billionaires generally gave away funds through tax advantageous foundations.
“These mega-foundations, which are effectively family enterprises with no accountability, are going to dictate public policy priorities for this country,” said Eisenberg. “I’m not sure that tax receipts haven’t done a better job, over time, of meeting the needs of our neediest people, than philanthropists.”
Not that I agree with Eisenberg either but he at least is hinting at the point I’m making.