Debate Heats Up Over Charity, Tax Breaks, and Helping the Poor

With eight- and nine-figure charitable gifts becoming commonplace and the wealthiest Americans controlling a rising share of the national income, the debate over whether philanthropy does enough to ameliorate social problems is moving front and center, the New York Times reports.

On one side of the debate are people like Eli Broad, a billionaire Los Angeles-based businessman who has become prominent in the education reform movement and over the past five years has given more than $650 million to elite institutions such as Harvard, MIT, and the Los Angeles County Museum of Art. Broad believes his charitable contributions have provided a greater public benefit than if the money had gone to government in the form of taxes. "I think there's a multiplier effect," he told the Times. "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."

It's an argument made by many, if not all, of the nation's wealthiest individuals. But some, like William H. Gross, one of the nation's best-known bond investors, dismiss the idea that the wealthy, through their philanthropy, benefit society more efficiently or effectively than government. "When millions of people are dying of AIDS and malaria in Africa," he wrote in an investment commentary last month, "it is hard to justify the umpteenth society gala held for the benefit of a performing arts center or an at museum."

Those two views epitomize a growing debate over what philanthropy is achieving at a time when, because of recent tax cuts, the wealthiest Americans give less of their income, in percentage terms, to government than at any time in recent memory. The debate is complicated by the fact that many people believe that philanthropy should play a lead role in alleviating the suffering of society's less fortunate. Moreover, for every three dollars that a donor contributes to charity, the federal government typically loses a dollar or more in tax revenue — some $40 billion in 2006, according to calculations by the Joint Committee on Taxation.

At the same time, the definition of what qualifies as a charitable deduction has broadened in the ninety years since its creation. In just the past five years, for example, roughly three-quarters of the charitable gifts of $50 million or more were given to universities, private foundations, hospitals, or art museums, a study by the Center on Philanthropy at Indiana University found. That should come as no surprise, said Art Taylor, president and CEO of the BBB Wise Giving Alliance. "Donors give to organizations they are close to. So they give to their college or university, or maybe someone close to them died of a particular disease so they make a big gift to medical research aimed at that disease. How many of the super-rich have that kind of relationship with a soup kitchen? Or a homeless shelter?"

Like many billionaire philanthropists, Thomas M. Siebel, founder of Siebel Systems, has given his largest gifts to his alma mater, the University of Illinois at Urbana-Champaign, including a gift of $32 million in 1999 for a computer science center bearing his name and, more recently, a pledge of $100 million for basic research that he hopes will reduce the nation's dependency on carbon-based fuels. But he has also donated more than $15 million to the Montana Meth Project, an organization he created to help fight substance abuse — a cause that receives little publicity or philanthropic support. "I think we'll save a lot of lives in the end," Siebel said. "Isn't that what philanthropy is supposed to be about?"

Stephanie Strom. "Big Gifts, Tax Breaks, and a Debate on Charity." New York Times 09/06/2007.