Billionaires have long used charity to bolster their public image while avoiding taxes.
Philanthropy is good but should not be a substitute for democratic decision making
The solution to this problem is simple - tax the rich.
Alan Davis is president of The Leonard and Sophie Davis Fund.
This is an opinion column. The thoughts expressed are those of the author.
Jeff Bezos's recent trip into space and the questionable intentions behind his large charitable donations tied to his trip have reignited national conversations around whether the wealthy pay their fair share in taxes. As President Biden continues to push for ambitious new tax increases on wealthy Americans and increased enforcement by the Internal Revenue Service, the question of "what do billionaires owe the rest of us?" has never been more important.
A recent ProPublica exposé showed that the 25 richest Americans paid $13.6 billion dollars in taxes from 2014 to 2018 as their wealth rose over $400 billion in the same time period, a true tax rate of only 3.4% as determined by ProPublica. Warren Buffett, who is perhaps best known for his support for higher taxes on the wealthy and his plan to donate $4.1 billion to various charitable funds, paid the smallest amount of his wealth in taxes of all the American billionaires profiled in the explosive piece. As his wealth grew by over $24 billion in the mid-2010s, he managed to pay just 0.1% of that in federal income taxes.
In 2006, when Buffett and other wealthy individuals announced that they would be giving away at least 50% (and in some cases up to 99%) of their wealth to charity, it was met with praise by many in the media and in charitable organizations around the world. But if the last year has taught us anything, the most charitable thing billionaires like Buffett and Bezos can do to move our country forward would be paying more in federal taxes. Instead of holding billionaires accountable to the commitments they've made, The Giving Pledge enables and rewards them for moving slowly on charitable donations through the US tax code.
Buffett argues that he believes his money will be of more use to society if disbursed philanthropically than if it is used to slightly reduce an ever-increasing US debt through paying more in taxes. However, while philanthropy is inarguably a good thing, when billionaires use their charitable giving as an argument for why they shouldn't have to pay taxes, what they're really saying is that their beliefs and desires are a better substitute for democratic decision making.
Elected representatives should be able to select how to use money for the public good, rather than relying on billionaires that give to charities in ways that are often in their own personal best interest. For example, while Bezos gave hundreds of millions away to charity to make his self-funded trip into space a little more palatable, he almost certainly spent the same or more amount of money on that very trip, in what was perhaps the most expensive self-indulgence in human history.
Last year, Bill Gates, another billionaire perhaps best known at this point for his philanthropic giving, announced he would be donating $300 million to COVID-19 relief. That's a significant number, but it's pocket change for one of the world's richest individuals. According to his estimated wealth, it's a measly 0.3% of his overall net worth, and Gates earned back that $300 million within just two weeks of donating it based on his passive investments.
This giving also gives Gates heightened influence in the debate over whether the patents associated with COVID-19 vaccination should be suspended to allow the free and widespread distribution of that research. How much better off would the US and the world have been if that money had instead been taken from Gates in the form of tax payments that were then used to fund COVID-19 relief, leaving that up to the democratically-elected US government?
While Gates' charity has since changed his position on waving patent rights to COVID relief, the episode shows that when billionaires donate money to charity it is often done to build credibility that is used to then push their interest over the public good.
The huge trickle-up effect that has taken place in our country for decades, driven in large part by policy changes that favor billionaires, has led to a slowly disappearing middle class, lack of investment in the public good and a deterioration of democracy. Meanwhile the rich continue to amass their wealth at the expense of the country, so much wealth that they can fund their own extraterrestrial travel and then expect that same country to cheer them on.
The solution to this problem is simple: tax the rich. If billionaires want to save the world, they can start advocating for specific, impactful changes to our tax code that will make them and their peers pay their fair share. It is high time that we stop letting the country's wealthy get off by making self-interested donations, and start requiring them to pay more in taxes. The IRS is the country's best charity, so let's make billionaires start funding it.
Read the original article on Business Insider