Marty Levine
December 9, 2024
Yesterday Inequality.org gave us another indication of how bad wealth inequality in the United States is. They found that:
- The collective net worth of America’s top twelve billionaires has surpassed $2 trillion as of December 3….
- The collective wealth of this iteration of the oligarchic dozen has increased by more than $1.3 trillion, or 193 percent, since Forbes published its 34th annual list of global billionaires in April 2020.
This chart can be seen as just a scorecard that keeps track of the winners and losers in the game of business. This could be an interesting bit of trivia for us to talk about over a cup of coffee or a glass of wine. But,to me, it is a bright, red warning sign alerting us to how broken our economic and political system is and of how urgently it needs to be fixed. The power of money to corrupt is seen across our nation and as wealth gets more and more concentrated, that power is more and more being used to allow those who have it to accumulate more and more. And our nation is not better off because of it.
Earlier this week the Institute for Policy Studies released “Gilded Giving 2024,” its annual look at the world of mega-philanthropy. It is a tale of how a noble pursuit of making the world better and helping ease the struggle and pain of people across the world has been taken over by those who see it as just another tool to be used to enrich and empower those who are already rich and powerful.
In great detail, IPS lays out how wealth hoarders have bent our nation’s philanthropic system so that they can gain the tax benefits of our current legal structure while retaining control of their wealth and using their invested “donations” as a tool to increase their wealth.
Philanthropy (charity) is supposed to be an act of generosity, of giving wealth away. We honor such acts because we see it as a sacrifice; we are using our assets to benefit someone else, someone who is less fortunate, and forgoing using our wealth for our enjoyment.
But for people who have been allowed to build great fortunes, philanthropy has become something different. It is another tool to increase their power and influence, avoid paying taxes, and increase their wealth. Here’s how IPS’s report pulled this together.
Most of today’s mega-rich Americans live off the “buy, borrow, die” philosophy — skimming cash off their pools of wealth and using lines of credit to avoid incurring taxable income — and their philanthropic practices mirror their tactics to accrue, preserve, and defend their wealth.
Financial services advisors understand that by including philanthropy management in their portfolio of services, they can make money and generate tax benefits for clients.
How? Wealthy donors use donor-advised funds (DAFs) and private foundations to get tax deductions immediately but maintain control over the disbursement of the money. While the law mandates that private foundations must disburse 5 percent of their assets each year, donor-advised funds have no such requirement. Donors are also pioneering the use of financialized instruments such as Limited Liability Corporations () , impact investing, and recoverable grants: There are not always explicit charitable tax breaks for these vehicles — though impact investing and recoverable grants can benefit from direct and indirect tax breaks — but they nevertheless carry advantages for both donors and the financial advisors who profit from managing pools of capital. In Bank of America’s most recent Study of High Net Worth Philanthropy, the number of wealthy households participating in impact investing had doubled over the past three years, and 40 percent were using that impact investing in place of some or all of their charitable giving.
These choices have made our working charities fragile and over-dependent on fewer donors. This is immediately dangerous for our society.
Every person (all are men but that is a story for another day)on the above chart has created foundations and/or established Donor Advised Funds (DAFs) often cited as evidence of their generosity. But they have not given up control of these funds. They have reaped the tax benefits that we have collectively put in place to encourage people to fill in gaps in our social safety nets and meet other societal needs that the government cannot or will not fill. However, they have too often chosen to skirt the limited requirements for the distribution of these funds to actual working organizations that make real people’s lives better. Rather, they have seen these “charitable” actions as just one more tool to be used to build wealth and power.
And because wealth is concentrated, the impact of these structures which are only available to the wealthiest men and women skews things greatly. Their philanthropy is eclipsing the combined giving of the 99+% of the population, categorized as small givers, everyday men and women.
The donor who creates a Foundation or a DAF does not need to give up her control of when and how those funds are distributed to actual working charities. With total control still in the hands of the wealthy “donor,” the public who has rewarded their “generosity” of their giving has little control over how and when these “gifts” are spent. These donors need not reflect any sense of collective judgement about where these funds are most needed and how they might do the most good; the judgment of only the donor counts. I’ve written often about how the ability to control how the “donations” are used has allowed wealthy men and women to control how our nation responds to significant challenges and how often this represents the opinion of one overriding the opinion of many. This is a truly undemocratic structure. For a group of men and women whose egos can be as large as their bank accounts, this is also truly dangerous.
But it can get even worse; it can go beyond an individual’s bad judgment to acts whose main beneficiary is the donor. Here’s how Gilded Giving 2024 describes how Elon Musk has used his “philanthropy:”
But the grants that the foundation has given directly to operating charities appear to have largely gone toward causes that will benefit Musk, his family, or his businesses. Domestically, the foundation’s grant recipients include The Foundation (a new private school founded and controlled by Musk); another school attended by his children; a charity managed by his brother: and a nonprofit fighting traffic congestion on the highway he uses to commute to work. Internationally, the Musk Foundation gave millions in grants to Giga, a United Nations program aimed at connecting schools worldwide to the internet — and, subsequently, some of the countries where Giga has been working became customers of Musk’s Starlink internet networking company.
Because charity has become one item in the portfolio of power investments of the mega-wealthy its corruptive impact is not limited to just diminishing the effectiveness of our philanthropic sector. Combining it with the ability to affect public policy and political outcomes makes its impact even more potent.
IPS’ report talks about Leonard Leo who has been the mastermind behind much of the growth of MAGA political power over the past several decades.
Leo, who is the co-chair of the nonprofit libertarian advocacy group the Federalist Society, uses a highly effective network of DAFs and operating charities to advance an ultra-conservative political agenda. Leo was reportedly the mastermind behind the conservative supermajority on the U.S. Supreme Court. The 85 Fund, a public charity Leo founded, gave millions to Project 2025, a blueprint for a right-wing presidential transition. And in 2021, he cultivated the single largest political advocacy donation in U.S. history up to that point when Barre Seid gave $1.6 billion to the Marble Freedom Trust (an issue-advocacy organization Leo chairs).
This is not a problem limited to the conservative political spectrum; there are progressive men and women who are using the same strategy to funnel money toward organizations and political leaders with whom they agree.
Our political system has also been assaulted by the power of wealth.
According to the New York Times “Elon Musk, the world’s richest man, spent over a quarter of a billion dollars in the final months of this year’s election to help Donald J. Trump win the presidency, federal filings revealed on Thursday. The sum is a fraction of Mr. Musk’s wealth. But it is nonetheless a staggering amount from a single donor, who poured the cash into allied groups and is now playing a role in helping shape the next administration.”
This spending bought Mr. Musk a powerful seat at the table in the incoming Trump Administration, playing a key role in selecting officials who will fill key roles and in leading an effort they say is designed to increase government efficiency.
His money has allowed him to activate his dislike of government regulations that can challenge his way of doing business. Here’s how NY Times reporter Eric Lipton describes it.
…one of the things that incredibly frustrates him is when he encounters paperwork requirements and regulatory slowdowns. He often comments about how he can build his rockets faster than federal bureaucrats can move paper from one side of their desks to the other. It just totally burns him up.
And that’s, in part, what has motivated him to get more involved in politics. He thinks it might give him the power to help defang them, and to limit their power, and to reduce what he considers to be redundant or ridiculous requirements to help wipe away some of this slowness that really frustrates him. And Musk was clear during the presidential campaign that he wanted to be named to a position in the future Trump government that would give him the power to help oversee significantly cutting back on federal regulations, federal employees, and federal spending.
Wealth in the hands of the few means trouble ahead for the rest of us. But there are things we can do,
We can add better regulations to our charitable framework that will result in less wealth and power building and more money flowing to working charities. IPS’s study concludes with a menu of needed changes in our laws and policies that would serve to make charity more about purpose and less about personal self-interest. Getting them in place would be a good move.
There is a need to change how we finance our elections and limit the money spent on lobbying. Getting limits in place would be a good move.
But these are not enough.
We must build the political willingness to make the kind of wealth hoarding and accumulation that results in the world we now live in impossible. Without eliminating the class of mega-rich people, creating better charitable regulations or reforming the rule for political donations is not enough. As the IPS study indicates — if people have almost unlimited fortunes, they will find or buy their way around the rules in ways that are only available to them. Money will make that possible for them. And the cycle of wealth building greater wealth at the expense of us all will continue.
