Stay Rich or Die Tryin’
An open letter to the Council of Foundations
“We cannot possibly transform the world unless we’re also willing to transform ourselves.”
— Kathleen Enright, CEO of the Council on Foundations
At Segal Family Foundation, we have long admired the work of the Council of Foundations. We have followed their excellent annual gathering — Leading Together — this week, and we have witnessed hundreds of influential funders from across the U.S. speaking to thousands of other philanthropic leaders. The Council is powerful, and it’s important to have an industry body that delivers honest information to philanthropists. With great power comes great responsibility, and so it is with great disappointment that we express our disapproval of the Council’s opposition to the Accelerated Charitable Efforts Act (ACE). The purpose of the proposed legislation is to create common-sense regulations to ensure funds given to donor-advised funds (DAFs) and foundations make their way towards organizations that need it.
The upshots of the legislation would establish minimal annual charitable payouts from DAFs at 5%. This is too low a number but a good start. The ACE Act would also make it so expenses and compensation to family members in private foundations would not count towards minimum annual charitable payouts. Who in their right mind could oppose this? Finally, if passed, deductions of illiquid assets given to DAFs will be based on actual liquidated value, not potential inflated appraised value. This is a positive step toward avoiding fuzzy accounting loopholes.
Shockingly, the Council of Foundations is running a campaign to oppose this act. The COF has contacted us to discuss this action with the hope of gaining support to oppose it. We believe the Council of Foundations’ opposition to this act is seriously misguided. They should be in support of legislation that is intelligently designed to promote the transfer of wealth to organizations in need. There is no justification for an individual to be afforded a tax deduction for transferring funds into a DAF and have no obligation to use those funds for the public good. The focus of philanthropy should be on the communities being served, not the benefits allocated to those doing the giving.
The fight over ACE is indicative of a broader and justified debate over the power wielded by the ultra-rich, specifically the need to create a more just tax system in the United States and around the world. It seems that over time our tax code has been gerrymandered to create a system, through various tax breaks, that benefits the wealthy beyond any practical purpose. Several recent articles indicate that there is a shift in sentiment where governments and influential groups are trying to create a more just tax system. Some examples of must-read articles are ProPublica’s The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income Tax and The New York Times’ How Long Should It Take to Give Away Millions? In addition, the G7 nations recently agreed to a minimum global tax rate on multinationals of 15%. It is nice to see common-sense policies being adopted.
It is time for the wealthy highlighted in the ProPublica article to speak out on creating a more just tax system. There is a general sentiment that the ultrawealthy understand the tax system is biased to an unnecessary extent in their favor. Nobody wants to address it directly since people are hesitant to fight for increasing their own tax burden. Yet, for most billionaires who pay little to no taxes at times, paying reasonable taxes would have no impact on their lives.
To Ms. Enright and the leadership of the Council: please be advocates for philanthropy to transform itself. Otherwise, we are what our worst critics say we are — a lot of wealthy individuals gaming the system to perpetuate their wealth and power at the expense of social good.
Sincerely,
Martin Segal
Chairperson, Segal Family Foundation
