FIRST IMPRESSIONS

Sometimes you come across a news article that is upbeat - that stays with you, possibly due to it leaving an impression that nothing but good will come of it. Then one day you get more thoughtful about it. There is a clear up side, but is there also a down side?

This was the case when at its origin I read articles in August of 2010 that high-lighted the good news that forty billionaires had committed to donating half their fortunes to charity. I thought this was great. Lots of good can come of this generosity and no one suffers if the donors get to have their names carved on facades of museums, medical buildings, park entrances, etc. as monuments to themselves (Bronze and marble statues are so yesterday). At the time, however, I had a prejudicial accompanying thought that should not, but can’t help but be mentioned: If a billionaire donates five billion, what on Earth is that person going to do with the other five billion?

Yes, a good story stays with you, and now that the gestation period is over, the downside has made its appearance.

There’s a reason why the tax code runs to thousands of pages. Bit by bit it has been crafted to provide the many ways in which the machinations of tax avoidance are rendered legal. It seems logical that a philanthropic gesture involving millions, or hundreds of million dollars, would look to lessening the burden by taking advantage of the tax laws, applying tax deferrals, establishing tax-free trusts, or other manipulations that are fully legal. That way, a hundred million dollar bequest can be finessed with many millions saved in tax avoidance. How great to achieve your goal at, say, sixty cents on the dollar.

But wait a minute. That is lost revenue to the government. In a government that operates with a budget surplus it might not be noticed. But in one that operates under a deficit, it gets added to the government debt.

So guess who will end up underwriting the philanthropist’s project, most of which a typical taxpayer will never even hear about, or care about?

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