June 9, 2021

New Orleans

In third grade, as a new arrival to New Orleans, we were bused to the decrepit, now condemned, and long gone, giant wooden Lakeview Elementary School. Mrs. Quirk, my teacher, was a character that I’ll never forget, not so much for what she taught me, although I remember being fascinated by an introduction to history and geography, but for some of the things she said. This was the age of Sputnik and the Cold War, so we had duck-and-cover instructions and evacuation drills.

She would call us to line up to leave, but she would also state clearly that if the announcement ever came, she would walk out to the asphalt recess area, paint a big X, and stand there and wait for big one. The message wasn’t lost on any of us, even as children, that none of us would survive atomic war.

The other oft-repeated line from Mrs. Quirk, in answer to almost any question requiring an absolute, was that “the only things certain in life are death and taxes.” Of course, as we all know now, only half of that is true, and it’s the death part, because taxes are only certain for some of us, as we have learned on an almost daily basis, because it seems the more you make, the less you pay. (Billionaire Legal Tax Scams)

Loopholes are part of it, but it seems that pretend-philanthropy may be another part of what in other contexts experts are calling philanthro-capitalism. Uncomfortably, a big part of this is now turning out to find a home in so-called DAFs or donor-advised-funds.  In this tactic, a donor gives money to Fidelity or some other entity to hold the money, claims the tax deduction, and offers advice on how the money is doled out.  I say uncomfortably, because the Tides Foundation, where I was a founding incorporator and 30-year board member, pioneered in this area. The problem is that there is no payout provision, even the miserly 5% that is common in foundations. Fidelity now reports that 29% of donations now come in as DAFs. Congress and others are looking at the fact that it then just sits there in many cases, rather than going to charities, though that’s not the case at Tides, but it’s still a big problem.  Attention is also being given to the Gates Pledges of billionaires to gift half of their wealth to charity before they die, as people start to notice how little of their money is moving to catch up with their jaw flapping promises.

Without changing these rules, there could be a flood of money coming into DAFs and other instruments being repurposed as tax dodges, as the rich worry about the prospects for Biden’s tax proposals to be debated. The administration has called for significantly increasing the tax rate on capital gains and recalculating gains on investments compared to original purchase prices for estates, which are not done now.  There’s an exemption now for estates at around $11 million, so not something any but the well-to-do need to fret about, but if you couple the huge reveal about how little billionaires are paying and the massive levels of wealth always looking for places to hide, it’s hard not to believe that unless rules are changed, a gazillion is going to disappear.

Now, will taxes become as certain as death once again?  It’s hard to take that bet.  Billionaires and philanthropies married to them will lobby hard to push Congress to stay the current course.  Looking at both party’s Congressional delegations and their annual financial disclosures, they are likely to find sympathetic ears, since electeds in this day and age are hardly a blue-collar bunch.

Still, the level of tax avoidance is an undeniable scandal, so maybe some change will still fall out of all of these tight fists.