Image: David Suarez (Unsplash)
We tend to admire the generosity of the wealthy when they donate millions and in some cases, billions of their own money to charitable causes. Bill Gates, Warren Buffet, and Jeff Bezos made the largest donations of 2020, amounting to a total of $10 billion to combat climate change. The Bill and Melinda Gates Foundation was set up mostly to fight diseases such as Malaria, HIV (Human Immunodeficiency Deficiency Virus), and Polio and donates roughly $4 billion annually. Since its establishment, the foundation has helped save 122 million lives. Philanthropy is defined as private initiatives taken for the public good. You could, however, argue that it’s more for public influence. Money has been the tool of choice to exercise power socially, politically, and economically. Some corporations have more wealth than the GDP (Gross Domestic Product) of some nations of the world. With this, they hold powerful decision-making positions. Recently, there has been much debate about wealth tax, specifically in the US (United States) House bill 1406. This bill is set to impose a 1% tax rate on US households with an income over $1 billion. So, is philanthropy then a way to avoid paying taxes? What does this mean for governments and their power, welfare, and wealth distribution? Do taxes even go where they are meant to go?
The way some billionaires acquire their money is already questionable and highly criticised, from mistreating employees to underpaying them. Billionaire philanthropy has been dubbed a capitalist “PR scam” by CEO Dan Price, to mask the methods in which they obtained their wealth. Former US President Teddy Roosevelt once stated that “no amount of charities in spending such fortunes can compensate in any way for the misconduct in acquiring them”. As well-intentioned as these donations may be, there is cause for concern that they are doing more harm than good.
These billionaires do not miss out on the money. In fact, the rich have gotten richer over the years despite efforts such as The Giving Pledge campaign, started by Bill Gates and Warren Buffett, urging the wealthy to donate well over half of their wealth to charity in their lifetime. The question of taxes then arises. Why pay taxes when you are donating the money anyway? What billionaires donate is a mere fraction of their wealth in comparison to what they would pay if the tax rates were similar to those of the working class. Donations of these sizes are in fact tax deductible. Not to mention the return on investment, such as public relations opportunities which only increases their wealth.
What does this mean for governments who are missing out on hundreds of millions worth of tax money? You could argue that many governments tend to mishandle and mismanage state funds anyway but, be that as it may these donations shift the responsibility from democratic institutions to the rich, thus undermining democracy. Oftentimes, these funds are stored in private foundations and donor-advised funds, as opposed to working charities and public foundations. These private foundations and donor-advised funds, as the name suggests, make decisions often to the liking of the donor. The donors decide what the problem is, and how to fix it. Naturally, this comes with no oversight or democratic controls.
What is worse, is that these philanthropic efforts of the private foundations can and do cross international borders into developing countries. These bring similar, even detrimental, democratic threats. What is often neglected in these instances, is a sound knowledge of the communities and the cultures where the money is meant to go to. Social and economic issues are multifaceted and historically rooted therefore, without the appropriate direction, oversight, and democratic guidance the money and the decisions made with it could harm the community. For example, should a foundation choose to start a large-scale farming project, small local farmers could be put out of business, the soil may be damaged as a result of modern farming practices, thus proving future farming efforts futile, and/or over time traditional farming methods and products could become obsolete.
Philanthropic donations rarely make it to the grassroots level as stated above, working charities often miss out on these donations. Consequently, the money does not directly benefit those who need it most nor does it aid the organisations that are already doing the heavy lifting. Wealth tax has therefore become a topic of debate. If the wealthy are taxed, the money could at least be directed and injected into the communities that need it. Having government and public officials in charge of wealth distribution adds transparency and accountability. Citizens will then have a right to demand that they be taken care of and be told how the money was meant to be divided. Whether or not these actors do right by the public in this regard is outside the scope of this article. In today’s capitalist society, money is power and influence. As the saying goes, “with great power comes great responsibility”, but should this responsibility fall on private individuals who have questionable intentions and motives?
Selycia Curwen is a BAdminHons Public Administration and Management student at the University of Pretoria. Her interests are widespread and therefore, along with the knowledge she attained from her degrees, she would like to actively participate in the achievement of the United Nations Sustainable Development Goals at both the national and international level.