Giving Till It Hurts

I had to come down to the office to write this before I forgot.  There are dishes in the sink to be washed.  A newspaper to be read.  Packing for the Tetons to finish and a brunch at Lou's Foodbar to go to, but this is more pressing.

We have a new acronym (at least it is new to me) in the financial industry.  It isn't the kind of thing which is likely to bring about another great recession, but it does confirm my suspicions that there is no ethical or moral limit to greed on Wall Street.

DAF.  Has a nice ring to it, kind of like WMD, but not the thing Republicans will use to fuel our fears and lead us into another protracted war in the mideast.  Donor Assisted Funds are financial gimmicks created by giant financial institutions to profit from charitable contributions.  If you are one of the multi-millionaires profiting from a DAF, you would likely say that they are strokes of genius.  If you are someone in need of charity and waiting for the United Way to give you a little hand, you would say that they are reprehensible.

A financial institution like Fidelity creates something called Fidelity Charitable.  Fidelity Charitable offers a convenient way for the wealthy to give to those in need without actually giving to those in need.  Fidelity Charitable happily collects charitable donations and invests them until the giver directs Fidelity to send the donation(s) to a charity of the giver's choice.  The giver gets a tax deduction from the get go and the tax deduction is based on the accrued wealth of the "charitable" account.  If one gave, say, $100,000 and that, thanks to shrewd investing, grew to $2,000,000, you get to claim all two mill as your donation.  The tax advantage is huge.  The thing is that the DAF doesn't really have to abide by the directions of the givers.  If the giver says to give a hundred grand to AIDS research, the DAF looks at that as a suggestion and legally can continue to invest the money rather than give it away.

"In one case, a DAF sponsor went bankrupt and the donated funds were seized to pay its creditors.  In another case, the DAF sponsor used donated funds to pay its employees large salaries, hold a celebrity golf tournament, and reimburse the cost of litigation when a dissatisfied donor sued.  In both cases, courts ruled against the donors and upheld the rights of the fund sponsor to exert full legal control over DAF funds." (Cullman, Lewis and Madoff, Ray. "The Undermining of American Charity". The New York Review of Books, July 14, 2016.)

On the surface it sounds like a convenient service designed to act as a middle man between the wealthy and those who are in need.  In reality it is yet another scam to pad the wealth of the one per cent at the expense of the rest of us.  For instance, if I, a poor and humble retired school  teacher, gave a hundred bucks to a charity, I would receive a deduction commensurate with my tax bracket.  I don't know what my bracket is, but let us say that my income gets taxed at fifteen per cent.  That means I would get a fifteen dollar deduction for my hundred.  If a one per center gave that same hundred, he would get a forty dollar deduction commensurate with his bracket of 39.6.  And that goes up to 60 dollars if the donor gives property (read: stocks).  And, of course, once that hundred dollar donation goes to a DAF, the wealthy donor can wash his hand of the whole thing and watch his donation grow in value while across the country charitable giving that actually gets to the place where it can do some good, is declining precipitously.

I could get even more detailed, but that would require way too much scholarship for this early in the morning.  I often get puzzled about all the anger out there, but something like this goes a long way toward explaining it.  But, hey, no problem.  All we have to do is get Congress to leap into action and do something about this deplorable situation.  They're going to deal with it as soon as they address assault weapons and background checks.