The Very Rich, It Now Appears, Give Their Share and Even More

NY Times ^ | 1/1/04 | DAVID CAY JOHNSTON

[Tumbleweed_Connection]

The top 400 American earners in 2000 provided nearly 7 percent of all the charitable gifts reported on income tax returns for that year, well in excess of their roughly 1 percent share of overall income, according to data released yesterday by the NewTithing Group, a charity that tracks giving.

The 400 taxpayers with the highest reported incomes in 2000 made an average of $174 million and gave away, on average, $25.3 million that year. Their combined giving totaled $10.1 billion, or 6.9 percent, of the $146 billion in charitable donations that Americans deducted on their income tax returns in 2000.

Charitable giving by this wafer-thin yet deeply rich slice of Americans, the new Internal Revenue Service data showed, represented an average of more than 14 percent of their incomes, compared with overall charitable tax deductions equal to 2 percent of adjusted gross incomes. Only a fourth of taxpayers file returns that allow them to deduct charitable gifts.

Because tax returns are private, no names are connected with the reported statistical data. But one detail in the data suggests that some of the wealthiest individuals in the nation - Bill Gates, George Soros, Ted Turner and perhaps others who are known to have contributed large sums to charity - may have given even more than they could deduct on their tax returns.

The disproportionate share of giving by the top 400 - who reported 1.1 percent of the $6.3 trillion earned that year by all Americans - occurred against a backdrop of a major shift in government policies on taxing and spending. Beginning in 1997, Congress passed a series of tax cuts, the benefits of which have gone largely to the richest Americans. At the same time, governments at all levels have pared spending on social programs from education to health care to welfare.

Supporters of the tax cuts, led by President Bush, have urged a shift toward charity to support social programs, while opponents have said that private acts of charity are an unreliable substitute for government assistance.

The NewTithing Group, a San Francisco organization that encourages wealthy Americans to give more of their money to charity, paid the I.R.S. to pull more detailed data on charitable giving from tax returns filed by the top 400 in 2000, the most recent year for which such figures are available.

The group received a breakdown of how much was donated in cash and how much in assets. It showed that nearly all of the increase came from gifts of assets, which qualify for a bigger tax break than cash. The data, along with NewTithing's analysis and commentary, were posted Wednesday night at the group's Web site, www.newtithing.org.

Giving by the top 400 from 1997 to 2000 grew significantly faster than their incomes, which ballooned with the rise in the stock market and the increased generosity of their capital gains tax cuts. The top 400 garner most of their income from the sale of appreciated assets, particularly shares of stock.

Their average incomes rose 80 percent in those years, to $174 million from $93 million, while average giving from the stratum more than quadrupled to $25.3 million from $5.9 million.

Claude N. Rosenberg Jr., a wealthy retired money manager who founded NewTithing, said that the 400 top taxpayers, generous as they may have been, could have easily afforded 40 percent more, or an additional $4 billion, without diminishing their economic status. NewTithing offers a calculator, called PrudentPal, at its Web site to show wealthy Americans how to give more and get the maximum tax benefit.

That such a tiny number of Americans are responsible for such a large share of gifts surprised some charity experts and scholars who study these issues.

"Seven percent of all giving is an astounding figure," said Edward N. Wolff, a research scholar at the Russell Sage Foundation and editor of the Review of Income and Wealth, a scholarly journal. But Mr. Wolff, whose research has concentrated on documenting increased inequality in American society, cautioned that other research reports showed that little giving by wealthy Americans went to charities that directly benefited the poor.

He also contended that charitable giving by the superrich, measured against their assets, had been on a long-term decline.

Lewis M. Feldstein, president of the New Hampshire Charitable Foundation in Concord, N.H., which has commissioned studies of giving by the rich, said he was not surprised by the figures. But, he added, he was certain that the figures would make jaws drop "if given in a speech to any audience of wealthy Americans."

Mr. Feldstein agreed that it would be important to know where gifts by the wealthiest Americans were directed.

"For an organization to qualify as charitable doesn't mean it benefits the poor," he said. "People tend to care the most about institutions they are personally connected to, and those that benefit tend to be those connected to people of means like land charities, museums, colleges and hospitals.''

Until publication of the most recent data, which goes through the year 2000, the highest income category for which the I.R.S. reported was $1 million and up, a group that has now grown to more than a quarter-million households. It recently began slicing the top bracket even finer, reporting incomes separately for those with incomes above $10 million per year, a group with about 11,000 taxpayers.

The I.R.S. also issued a special report on the 400 Americans with the highest incomes each year since 1992. There were 2,211 taxpayers in the 3,600 tax returns examined over the nine-year period; just 21 taxpayers made the list every year.

Actual giving by the top 400 taxpayers may be even larger than the deductions reported on income tax returns.

Mr. Gates, the co-founder and chairman of Microsoft, announced in 1999 gifts totaling $15 billion to the Bill and Melinda Gates Foundation. Yet the I.R.S. data show total charitable giving by the top 400 of just $11 billion for that year.

The most logical explanation for the disparity is that only part of the gifts from the Gates family qualified for an income tax deduction. Mr. Gates announced that his gifts were in shares of Microsoft. Congress limits deductions for gifts of appreciated assets, such as stock, to 30 percent of the donor's adjusted gross income. To deduct the entire gift, Mr. and Mrs. Gates would have had to report income of $50 billion in 1999.

Gifts that cannot be deducted immediately, however, can be carried forward and used as deductions over the following five years.

Similarly, Ted Turner, the founder of CNN, which he sold in 1995 to Time Warner, promised to give a total of $1 billion over 10 years to charities for the United Nations. If such gifts were made in appreciated stock, Mr. Turner would have to report an annual income of at least $333 million to qualify for the full deduction.

Mr. Soros, who made his billions running a highly successful hedge fund, has also announced huge gifts that may have exceeded the maximum deduction, based on his public statements and the new I.R.S. data.

[FITZ]

I think everyone I have ever met who could find a way to scam on their taxes scammed on em.

What types of scams? I don't know anyone who admits they did --- most only claim the kids they actually have, don't try to claim a pet or deductions they don't have.

[staytrue]

September 3, 2002
United Way Official Knew About Abuses, Memo Says
By DAVID CAY JOHNSTON

Contrary to his public denials, the chief executive of the scandal-ridden United Way in the Washington area was aware of improper financial practices, was involved in them and disregarded those who tried to stop them, one of the charity's top executives has written in a memorandum.

Norman O. Taylor, the beleaguered chief executive of the United Way of the National Capital Area, has repeatedly said he was unaware that expense accounts had been abused, that donations had been inflated to make the agency appear more efficient and that only 52 percent of the gifts from some donors had been passed on to social services charities. Mr. Taylor has also repeatedly denied knowing about a $6,000 a month consulting contract for his predecessor, Oral Suer. The senior executive wrote, however, that Mr. Taylor had arranged that contract.

The accusations were made by Kenneth Unzicker, the director of corporate fund-raising campaigns for United Way in the Washington area, in a four-page memorandum to an ethics committee formed to deal with the charity's crisis.

Mr. Unzicker, who has worked at the agency for 28 years, wrote of his ''grievous concerns about existing policies, practices and conditions'' at the charity. ''In the past 19 months,'' he wrote, ''my attempts to air my concerns have been rebuffed or ignored by Norman Taylor and others in control of the organization.''

The memorandum was dated Aug. 27. A copy was provided to The New York Times by a third party after Mr. Unzicker sent it. The ethics committee, composed of volunteers, will meet today to review the information from Mr. Unzicker and others.

The committee chairman, Prof. Samuel Dash of Georgetown University Law School, sought such information in a meeting last month with United Way staff members at which he promised that they would not face retaliation. In an interview, Professor Dash, who was counsel to the Senate Watergate Committee in 1974, restated his determination to protect whistle-blowers.

Calls to Mr. Taylor's home and cellphone yesterday were answered by his wife. He did not call back. Mr. Suer did not respond to messages left on his home telephone.

Mr. Unzicker wrote that he had attended more than a half-dozen meetings at which Mr. Suer had orchestrated Mr. Taylor's appointment as chief executive. ''The strong implication'' of these talks, Mr. Unzicker wrote, ''was that the approval of Mr. Suer's consulting contract was a condition of Mr. Taylor's selection as C.E.O.''

The memorandum says Mr. Suer ''maintained complete control over the selection process'' for his successor. ''Mr. Suer never disclosed to the selection committee the circumstances of Mr. Taylor's departure from the United Way of Baltimore,'' Mr. Unzicker wrote.

Mr. Taylor was ousted as head of the Baltimore United Way in 1995 for what its board members have called sustained unsatisfactory performance. He was paid a six-figure settlement -- the amount was not disclosed -- which was never listed on that charity's Form 990 tax returns, although such disclosure was required by federal law.

''Mr. Taylor flatly denied any knowledge of these contracts'' with Mr. Suer and a second person, Brian Ferguson, at a United Way board meeting and at a briefing last month for agencies that depend on United Way money, Mr. Unzicker wrote. Mr. Ferguson, a videographer, was the organization's publicist under Mr. Suer. Mr. Unzicker wrote that after hearing Mr. Taylor's denials, ''I confronted him with this lie, to which he had no response.''

Mr. Unzicker wrote that in 2000 he grew concerned about expense account abuses by Mr. Suer and others, whom he did not name. He delayed raising the issue, he wrote, until Mr. Taylor took office in February 2001. Mr. Unzicker and his staff felt relieved after the change in executives, he wrote, saying that they expected changes by Mr. Taylor.

''My relief was short-lived,'' Mr. Unzicker wrote. ''The first time I was asked to sign a check written to Mr. Taylor for expense reimbursement turned out to be the last time I was able to sign a check payable to him. I questioned Mr. Taylor about his request for reimbursement of several thousand dollars. I was told that he was paying for Internet service'' for the United Way office that solicits contributions from federal workers, known as the Combined Federal Campaign.

Mr. Unzicker wrote that Mr. Taylor said ''he would provide a more detailed explanation later.''

''I did sign that check,'' Mr. Unzicker added, ''but I was never again asked to sign another check for Mr. Taylor.''

Mr. Unzicker wrote that he and a member of his staff, Dulcy Hooper, had warned Mr. Taylor in February 2001 about ''funny money,'' which was the staff term for inflating donations to make the charity appear to spend a reduced share of its revenue on overhead. Mr. Taylor responded by having Ms. Hooper fired and by shutting Mr. Unzicker out of executive decisions

[Cicero]

As several posters have noted, rich liberals tend to give their money either to questionable charities, like Stanford, or to actively destructive charities, like Planned Parenthood, NARAL, NOW, the ACLU, or the like.

It's too bad there isn't some way to weed out the destructive charities and foundations. Unfortunately, just the opposite tends to happen. The Christian Coalition, a somewhat naive but useful organization, lost its taxfree status, but the ACLU will never be subjected to the same legal challenge to its far more egregious behavior.

[staytrue]

Charity embezzler gets 7-year term
United Way fraud earns 'tough' time
Desda Moss
USA Today
June 23, 1995

William Aramony, the high-living ex-chief of United Way, was sentenced to seven years in prison Thursday for looting the coffers of the nation's largest charity network.

Aramony's lawyer, William Moffitt, had asked for leniency, saying his client, 68, suffers from a degenerative brain disease and has other medical problems.

"A long sentence is tantamount to a life sentence for Mr. Aramony," he said.

But U.S. District Judge Claude Hilton gave Aramony all but one of the eight years he faced under federal sentencing guidelines. He also must serve three years of probation and was ordered to repay $552,000 in misused funds.

He is expected to surrender to a minimum-security federal prison within four to six weeks, as soon as space becomes available. Until then, he remains free on bond.

Although it isn't known which of the federal prison system's 81 facilities Aramony will be assigned to, Federal Bureau of Prisons spokesman Dan Dunne said prison life will be much different from the jet-setting lifestyle Aramony enjoyed as head of United Way.

"Living conditions are spartan. It's not 'Club Fed.' The negative impact of confinement is real," he said.

"This is a tough, hard sentence that certainly sends a message to anyone responsible for stewardship of charitable accounts," said Assistant U.S. Attorney Randy Bellows.

In April, Aramony and two former United Way associates, Thomas Merlo, 64, and Stephen Paulachak, 50, were found guilty of federal fraud and conspiracy charges.

Merlo and Paulachak were accused of helping to funnel money to Aramony, as well as themselves.

Merlo was sentenced to four years and seven months in prison and ordered to repay $552,000. Paulachak was sentenced to 2 1/2 years. All say they'll appeal.

During the three-week trial, prosecutors portrayed Aramony as a corrupt womanizer who spent hundreds of thousands of dollars of the charity's money to finance flings with young women and trips to Egypt, London, Paris and Las Vegas, among other places.

Bellows put the final tally on the amount Aramony defrauded United Way at $1.2 million, taking into account such things as untraced trips and gifts.

Aramony headed the United Way for 22 years before allegations of financial impropriety forced him to resign in 1992.

The scandal was a stunning blow to the nation's largest charity, which funds 47,000 programs through its 2,100 autonomous locals nationwide.

It caused donations to falter. Hundreds of independent United Way locals withheld dues from the Alexandria, Va.-based national office. The office is now about one-third smaller than before 1992.

United Way officials said the sentencing closes a painful period in the organization's past.

"Obviously, this is a personal tragedy for the individuals involved but a self-inflicted one. It is important that the United Way system direct its focus to the future and not dwell on the past," said board chairman Keith Bailey.

[staytrue]

It's too bad there isn't some way to weed out the destructive charities and foundations.

Eliminate the charitable deduction (and most any deduction) from the income tax code and lower the tax rate.

[Auntie Dem]

Not only do conservatives give more dollars in total to charity, but, a greater percentage of conservatives give (any dollar amount) than liberals.

My experience over 33 years with tax returns would confirm that. Overwhelmingly of the returns I have seen or prepared, the leftists give far less than those on the right. The lefties also are less likely to be associated with or devoted to a church of any kind.

Also, I have had the opportunity to see tax returns of "famous" and "prominent" Americans, and I can attest to the absolute stinginess of many on the left, who publicly lambast the rest of us about how we should be helping the "poor and disenfranchised", yet they give NOTHING on their tax returns.

[Tumbleweed_Connection]

I haven't read the above so this may be redundant but what is a charity and why do these government leftist taxpayer feeder groups qualify? Why are our organizations biting the bullet? No response necessary.

[philetus]

If you give to the needy<real charity) and then deduct it from your taxes, is it really charity?

[KAUAIBOUND]

Foundations are the vehicle by which the very wealthy, say $20 million in net worth and up, pass their wealth on their heirs without going through probate or paying the estate tax. It also allows them to control the disbursement of their estate to their heirs long after their death. The assets transferred to the foundation qualify as a tax-deductible donation. By law, each year the foundation is required to donate 6.2% of its assets to charity, or pay an excise tax on the total assets. If the assets are properly invested, usually in real estate or blue chip stock, annual returns of 8 to 12% can be expected. The return on investments remaining after administrative costs (say .5% to 1%) and the donations are subtracted can be paid to the "directors" (heirs) as a "management" salary. For these directors salaries to be significant, the foundation has to be fairly large. For example, a $100 million foundation earning 10% and with a 1% administrative fee will have about $2.8 million to distribute to the heir-directors. While this example does not factor the declining value of the assets from inflation (real estate is a preferred vehicle for this reason), even distributing the $2.8 million to 20 heirs gives each one $140,000 per year - plenty to live on or piss away, as the case may be. I hope this example shows that probably 80% of foundations are set up for other than charitable purposes.

[freedox]

"But Mr. Wolff, whose research has concentrated on documenting increased inequality in American society, cautioned that other research reports showed that little giving by wealthy Americans went to charities that directly benefited the poor."

It occurs to me that people like Mr. Wolff are overlooking the most important thing that these wealthy Americans have done to benefit the poor......haven't they have created jobs for millions of them? Of course, that doesn't seem to count for much these days. Unfortunately, "charity" has been redefined in our society as only a freebie hand out.......not a hand up.

[staytrue]

I hope this example shows that probably 80% of foundations are set up for other than charitable purposes

I could not agree more. Plus, their heirs get some cool title like "director of foundation to help humanity".

I would like to add that it is time to dump the estate tax so that instead of these idiotic tax dodging foundations, the heirs of the wealthy can learn how to run a business that hires people and produces free market goods and services.

For profit businesses produce goods and services that people find so valuable that they will pay for them and they pay taxes on the profit. Non profit enterprises produce goods and services that people will use only if free, use capital that is available only if tax deductible, and pay no tax of profits.

Which type of enterprise should be favored ? The answer is for profit enterprises.

[Cicero]

So far, the policy has been to be tolerant and nonjudgmental when deciding what is a charity. It's a charity if people think it is, and if it's non-profit according to certain legal norms.

The problem is, the usual definitions of charity--feeding the hungry, clothing the naked, caring for the sick, praying for the dead, and the like--are no longer at the center of things. Instead, it's a charity if you save whales and kill babies.

I have no idea what to do about this, because if you start weeding things out, you'll probably end up with Planned Parenthood left in and Christian churches left out.

[Tumbleweed_Connection]

Why isn't it?

[Elliott Jackalope]

I remember when I was just getting started in Silicon Valley, and my employer at the time had one of those "United Way" fundraising drives going on. They had the goal of raising 100% donations from all of the employees. I decliined to contribute, since at the time I was not earning enough to be able to afford my own car, and had to take the bus to work. This was while I was living in a cheap, nasty apartment in the downtown area, since that was all I could afford.

Long story short, I got called into my bosses office where I was told in no uncertain terms that I would either contribute to United Way, or I would be fired. I gave in, and signed off on the minimum weekly contribution. That was also the last time that I have given to ANY charity under any circumstances. I deeply despise United Way, and I hope they enjoyed the money they got from me when I couldn't afford to give it, because they have poisoned me to the idea of ever giving to any charity again for the rest of my life!

[HiTech RedNeck]

That stynx.

[Tumbleweed_Connection]

Christian churches left out.

They already are.

[MarkL]

It's too bad there isn't some way to weed out the destructive charities and foundations. Unfortunately, just the opposite tends to happen. The Christian Coalition, a somewhat naive but useful organization, lost its taxfree status, but the ACLU will never be subjected to the same legal challenge to its far more egregious behavior.

Seek, and ye shall find...

Here are some of my favorites...

City Union Mission in KC (you'll be able to find shelters in your own city),

Harvesters, a KC food bank

Hope House, a local woman's (and children) shelter

and of course, The Salvation Army.

And I donate time to the synagoge that I belong to as well. I'm in the process of upgrading their entire network, on nights and weekends, after hours, so I don't have to bill them for my time. If you spend just a little time, you will find worthy charities. And the way I see it, the closer they are to "the work," the less chance that there will be execs getting hundreds of thousands of $$$ in salaries.

Mark

[MarkL]

Also, I have had the opportunity to see tax returns of "famous" and "prominent" Americans, and I can attest to the absolute stinginess of many on the left, who publicly lambast the rest of us about how we should be helping the "poor and disenfranchised", yet they give NOTHING on their tax returns.

That's because leftists see "charity" as the job of the government. The left does not believe in personal responsibility. When asked, "Are you your brother's keeper?" the answer of the left is "We are all our brothers' keepers." This gives them the feeling of doing something, while shifting responsibility to others. Conservatives, on the other hand, typically say, "Yes, I am my brother's keeper," and take it seriously.

I grew up in an Orthodox Jewish home, raised by my mother and grandfather. He would take in men who were travelers collecting money for assorted Jewish charities (usually schools), usually for 2 or 3 nights, so they didn't have to spend money on food or lodging. And when they left, they'd have a hefty check with them as well. I'm fairly certain that none of those charities were registered as tax exempt institutions. I can say with great certainty, that he didn't give a darn about tax deductions. He gave at least 10% of his income directly in charity. He also volunteered his time to a Jewish retirement home (while he was in his 70's and 80's) so they wouldn't have to pay for a "mashgiach," someone who makes sure that all the rules of kashruth are followed, and as a Chassan (a prayer leader) on the High Holy Days.

Mark

[MarkL]

That was also the last time that I have given to ANY charity under any circumstances. I deeply despise United Way, and I hope they enjoyed the money they got from me when I couldn't afford to give it, because they have poisoned me to the idea of ever giving to any charity again for the rest of my life!

It's not my place to tell someone what they should do (although that's never stopped me before, :-) ) but should you ever feel the need to give to a charity, just find one that you feel is doing good work. Something that you agree with. Or do some volunteer work. Don't let a bad employer or a group with questionable actions, like the United Way keep you from doing something that you want to do.

In my case, with the exception of a donation in my mother's memory, I give no money to the synagogue I belong to, although I do volunteer work there all the time (on their computers and networks). I don't agree with their politics. So I give donations of money to charities that I do agree with.

Mark

[Tax-chick]

I would like to see how Mr. Soros's charitable giving compares to the amount he spends on his Bush-hatred.

Depending on how the "charities" are structured, his Bush-hatred may be the very "charitable giving" they're talking about. All it takes is a 501(c)(3); some of them are very political, and get away with it.