George Soros funded a tax-exempt charitable structure called the Open Society Foundations, which carries out his political agenda.
Michael Bloomberg formed the Bloomberg Philanthropies, which focuses on his favorite public policies as sustainable cities, clean energy, vibrant oceans, and obesity prevention.
The Ford Foundation, which has 38 times more money than the Koch brothers, has made it a goal to focus entirely on inequality and what its president calls social justice infrastructure.
Elizabeth Warren, while a Harvard professor, built her reputation under the guise of so-called medical bankruptcy research for guiding policy measures. It was funded by the Robert Wood Johnson Foundation. The research was not overseen by the Harvard Law School but through a modest community healthcare clinic run by a social activist training researchers in techniques and strategies of scholarship for social change.
President Barack Obama served as a paid director of the RWJ foundation, which provided grants to such organizations as the Midwest Academy which taught the tactics of direct action, confrontation, and intimidation.
It is true that wealthy right-wingers use charitable foundations to promote their freedom-minded agendas as economic liberty, and other governmental reforms.
However, as the American Spectator Magazine noted in an article entitled “How Left-Wing Foundations Control Politics,” the media takes the view that left-wing donors smell like public interest while right-wing donors smell like special interests.
But are political policy-directed foundations of either wing entitled be tax exempt?
There is little question that some of America’s wealthiest people have given away fortunes for worthwhile charitable causes. Bill Gates, to his credit, is not building a perpetual institution. His foundation is directed to give away its entire endowment within 40 years of his and his wife’s deaths. Similarly, Warren Buffett stipulated that his donation is spent quickly in yearly installments.
It’s a free country and people ought to be able to deploy their wealth as they see fit. The problem with tax-exempt foundations is that these are not only private endeavors. The American taxpayers are involuntary partners in these efforts.
How are these efforts being supported at the American taxpayer’s expense?
These billion-dollar donations generate a valuable current income-tax deduction. Donating assets that have increased substantially in value avoid the recognition of capital gains.
However, the charitable deduction is not calculated on the cost basis of the assets given, but at their current market value.
If these billionaires have such great amounts of excess capital that they do not need it for their support, then why isn’t the donation taxed like any other sale before a valuable tax deduction is allowed. Besides that, nothing is actually given away since it is owned by a foundation which is still under the control of the donor.
The tax code is replete with mark-to-market rules. Why shouldn’t they apply to billionaires funding their personal policy agendas?
The taxpayers continue to subsidize the ongoing operations because the income earned by most tax-exempt foundations is only subject to a meager 2% net investment income tax.
Even that can be reduced to 1%.
If these foundations were fully taxable, then they likely would be paying the same maximum income-tax rates that apply to everyone else’s investment income.
Quite literally there are hundreds of billions of dollars of invested assets by these faux organizations that portray themselves as charitable that are not subject to income tax. The charitable foundation is merely required to pay out a small percent of funds. In essence, it likely pays out less than what it saves in taxes by being exempt from income tax. A clever way to stick taxpayers with the bill.
An entire industry has built up promoting charitable foundations. The result is that the foundation directors become the new aristocracy of vast sums of wealth and political influence. They are accountable to no one.
If the purpose of the estate tax is to break up large estates, then clearly these charitable foundations achieve just the opposite.
With so many billionaires declaring their support for the estate tax, I think we should give them what they want.
For estates under a billion dollars, there should be no estate or gift tax levied. Let people pass down to the next generation the financial fruits of their life’s work.
Over time, as assets are divided up among family or otherwise through divorces, these large estates will be rendered into small estates. Usually, this occurs within three generations.
When estates get to a billion dollars, then a credit against the estate tax should be provided for all the income tax paid during life by the now decedent.
If billionaires want to use their excess accumulated wealth for influencing public policy, they should be free to do so. But not on the backs of the regular taxpayers.
Let them set up all the foundations they want in perpetuity with capital gains paid on the funding under mark-to-market rules. Investment income should be subject to regular income tax on the earnings.
If they are so enamored with doing good, or giving back, or redeeming their conscious, then that is a very good thing. They shouldn’t need to get tax benefits as encouragement.
Charitable trusts have a long and respected history. They serve a wide variety of needs of society much more efficiently and effectively than any government bureaucracy. Great scientific discoveries are made by organizations free from the limitations of doing what benefits some politician’s re-election.
It is hard to imagine how society would continue without all the good work done by religious and other institutions devoted to the betterment of society’s more unfortunate members.
However, the abuse of tax-exempt charitable foundations for mere political purpose by billionaires is too much for America to tolerate any longer.
It’s time to put an end to this.
Read more: Denis Kleinfeld: It’s Time to Make Billionaires Pay Estate Tax