Is it Charity or Something Else?

Robert Reich caused a stir when in a recent article, he suggested that the United States’ tax code should be changed. He asserted that many wealthy donors are helping themselves and their wealthy friends by donating to certain charities. He suggested that full deductions be allowed for charities that benefit the poor and that half deductions be allowed for donations to universities and art institutions. He referred to his thoughts as a “modest proposal.” Many others have since commented on Reich’s article, including “The Wealth Report” blog in the Wall Street Journal.

Supporting the poor and underprivileged is a tremendous goal and there are many organizations, globally, that do it well. They deserve to be funded as much as any other institution. However, to change the way the tax code works, would create a hierarchy among not-for-profit organizations based on their missions. That doesn’t sit well with me. I am a huge supporter of environmental organizations. One could argue that the donors to organizations that benefit the Earth should get the biggest tax deduction because without their work, and the health of our environment, all else is for nought. I might have a supporter in Yvon Chouinard, the founder of Patagonia Inc., who started 1% Percent for the Planet. Chouinard’s goal was to incentivize others to exclusively support organizations serving the environment. There is a great quote from David Brower on the home page of the 1% website. Brower said, “There is no business to be done on a dead planet.”

I thought about Robert Reich’s viewpoint, then discussed it via e-mail with one of Horst Engineering’s advisors, Bill Ghormley. Bill understands higher education, after having paid for a combined eight years of private college tuition for his two kids. He also has close ties to the Museum of Fine Arts in Boston, Massachusetts, so I knew that he would have an opinion…I just didn’t realize how strong.

With regard to Harvard and other universities, Bill said, “Harvard is using its resources to build research facilities in their new Stem Cell Institute that will change all of our expectations around a wide range of human sufferings.  Note, ALL of humanity’s expectations. Harvard is also providing an environment where many international diplomatic efforts can be thought through and brought through into existence in its school of Government. Harvard is redeveloping Allston Center, thinking through the green/clean lens to create something new and better to inspire city architecture worldwide. Harvard is a gem — a place our country can point to and say ‘this is exceptional!’  Just ask for perspective from other lands — Harvard is the model institution many admire — worldwide.”

I guess he doesn’t think the IRS should cut the tax deductions for Harvard’s donors!

What about the arts? Much the same according to Bill. He feels that both universities and art institutions deliver value to their communities. Of course, he and I both agree that there is much waste in how funds are raised and spent. Not-for-profit organizations aren’t any different than for-profit organizations. They can be latent with waste, mis-managment, and fraud, just like other enterprises. The same inflated compensation that is paid to the CEO’s of big corporations is making its way into the not-for-profit world. Many executive directors of .org’s are being given rich pay packages by their boards, which are stocked with their cronies. The governance of not-for-profits, which is not regulated by the government like for-profit corporations, is very important. I often use Charity Navigator or similar online tools, when evaluating .org’s.

In his e-mail, Bill went on to say, “The culture created at such peak institutions flows down in many ways — from potential cures for medical maladies to free concerts, free admissions, stimulation of youth creativity, access to beauty and the provision of spiritual home — these “charitable institutions” are serving a large number of people — certainly the vast majority of Americans.   However, tax policy creates huge advantages for institutions that primarily serve wealthy patrons — true.  Those institutions often create the highest of human achievement — and often the environment those achievements take place in MUST be separated from “the street” where survival is the sad common denominator. So, I guess I don’t agree with Robert.  His view leaves empty the pinnacle, the superlative best that inspires all who seek to achieve anything.  High achievement deserves support and deserves a tax break and a lot of room to flourish and lead us all to do more with our lives.    These charitable institutions are creating excellence, inspiring excellence and nurturing the creation of great beauty — away from Government oversight and Religious overbearance — and that is valuable to all.”

Clearly, Bill was stimulated by the comments from Reich.

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