Charitable tax breaks.

Debate grows in the United States over charity - and its tax breaks

By Stephanie Strom
Published: September 5, 2007

NEW YORK: Eli Broad, a billionaire businessman, has given away $648 million over the last five years, to Harvard University and the Massachusetts Institute of Technology to establish a medical research institute, to the Los Angeles County Museum of Art, and to programs to improve the administration of urban schools and public education.

The rich are giving more to charity than ever, but Broad is not the only one footing the bill for such generosity. For every three dollars he and other wealthy individuals give away, the U.S. government typically gives up a dollar or more in tax revenue, because of the charitable tax deduction and by not collecting estate taxes.

Broad says his gifts provide a greater public benefit than had the money gone to taxes for the government to spend. "I believe the public benefit is significantly greater than the tax benefit an individual receives," Broad said. "I think there's a multiplier effect. 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 is an argument made by many of the nation's richest individuals. But not all of them. Take the investor William Gross, also a billionaire. Gross vigorously dismisses the notion that the wealthy are helping society more effectively and efficiently than government.

"When millions of people are dying of AIDS and malaria in Africa, it is hard to justify the umpteenth society gala held for the benefit of a performing arts center or an art museum," he wrote in his investment commentary this month. "A $30 million gift to a concert hall is not philanthropy, it is a Napoleonic coronation."

Elaborating during an interview, Gross said he did not think the public benefit from philanthropy was commensurate with the tax breaks the givers received. "I don't think we're getting the bang for the buck for gifts to build football stadiums and concert halls, with all due respect to Carnegie Hall and other institutions," he said. "I don't think the public would vote for spending tax dollars on those things."
The billionaires' differing views epitomize a growing debate over what philanthropy is achieving at a time when the wealthiest Americans control a rising share of the national income and, because of sharp cuts in personal taxes, give up less to government.

A common perception of philanthropy is that one of its central purposes is to alleviate the suffering of society's least fortunate and therefore promote greater equality, taking some of the burden off government. In exchange, the United States is one of a handful of countries to allow givers a tax deduction. In essence, the public is letting private individuals decide how to allocate money on their behalf.

What qualifies for that tax deduction has broadened over the 90 years since its creation to include everything from university golf teams to puppet theaters - even an organization established after Hurricane Katrina to help practitioners of sadomasochism obtain gear they lost in the storm.

Roughly three-quarters of charitable gifts of $50 million or more from 2002 through March 31 went to universities, private foundations, hospitals and art museums, according to the Center on Philanthropy at Indiana University.

Of the rest, the Bill & Melinda Gates Foundation accounted for half on the center's list. That money went primarily to improve the lives of the poor in developing countries.

Valuable as that may be, it also meant that the American public effectively underwrote several billion dollars worth of foreign aid by private individuals, even though poll after poll shows that Americans are at best ambivalent about using tax dollars for such assistance.

In contrast, few gifts of that size are made to organizations like the Salvation Army, Habitat for Humanity and America's Second Harvest, whose main goals are to help the poor in the United States. Research shows that less than 10 percent of the money Americans give to charity addresses basic human needs, like sheltering the homeless, feeding the hungry and caring for the indigent sick, and that the wealthiest typically devote an even smaller portion of their giving to such causes than everyone else.

"Donors give to organizations they are close to," said H. Art Taylor, president and chief executive of the BBB Wise Giving Alliance. "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 a relationship with a soup kitchen? Or a homeless shelter?"



Continued

http://www.iht.com/articles/2007/09/05/business/giving.php?page=2

Are the laws regarding charitable tax breaks too broad? For foundations as well as individuals? Should they be ammended?