Philanthropy in the US fills the welfare gap
The row swirling around the government’s plans to cap charitable giving in the UK, as a way of closing a tax loophole, would be unthinkable in the US. Giving your money away is full time job for some of America’s richest individuals.
The Bill and Melinda Gates Foundation is a philanthropic behemoth investing in everything from malaria prevention to education. Warren Buffet, the world’s second richest man has given most of his money away. And the founder of American philanthropy, the Scottish born steel magnate Andrew Carnegie once famously declared that the man who “dies rich dies impoverished.”
A few years ago I worked on a radio documentary about the motivations behind America’s lavish giving and it became obvious that a number of factors were at play. For some of the wealthiest givers there is the desire to leave a legacy, a slice of immortality emblazoned or etched onto a marble slab, a university building, a hospital wing or a concert hall.
Remember Carnegie Hall in Manhattan? The billionaire Ted Turner told me that he thought it was a crime to leave too much money to his kids. He was the first American to give away a billion dollars to the UN of all places: 100 million every year for a decade. Most of the money went to UNICEF. When I asked him why he gave a billion, he looked at me with his bright blue, ironic eyes and drawled: “niiiiice round figure …and my kids ain’t exactly missing meals or anything!” In other words there was enough money left over for the Turner heirs.
The expectation of donation
Even if you’re giving a fraction of that sum philanthropy is part of America’s DNA. It fills the holes left by a parsimonious state. It is widely expected. The American schools my children attend all expect donations on top of the already exorbitant school fees. Once they graduate they will be asked to give generously, if they can afford it.
The culture of philanthropy is not created by the tax coder but it is certainly facilitated by it. In the US the cap on tax deductible giving is 50 per cent of income. If you give away paintings, cars or land it is even greater.
At my daughter’s annual school auction everyone is expected to donate something – for a tax deduction – and purchase it for another. The pink deduction forms for the Internal Revenue Service are handed out between courses of rubber chicken and apple pie. It is all very efficient and I have never heard anyone suggest that this could be a used as a loophole for dodging tax. There are other ways of doing that… America prides itself on not being a European style welfare state.
The relatively little welfare that does exist is being slashed in these austere times. If private philanthropy dried up because the tax benefits were reduced millions of Americans would feel the pain.
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