Private foundations have been one of the biggest tax scams since 1913.
Governments are about to launch a free-for-all of taxes to pay for the free-for-all of spending on COVID-19—taxes on income, on wealth, on beer and billionaires, on Netflix, on carbon, on real estate transactions, on stock holdings, on international holdings, on just about everything.
But the tax-and-spenders now in control of the United States, Canada, and most Western countries have missed one of the biggest available tax grabs of all—the trillions in private charitable foundations, much of it under the control of the likes of Bill Gates and Jeff Bezos through their family foundations.
Family foundations have been the biggest tax scam going since 1913, when John D. Rockefeller, founder of Standard Oil, convinced the New York legislature to allow him to transfer $100 million in stock to his Rockefeller Foundation. In so doing, Rockefeller—one of the hated robber barons of his time who was embroiled in antitrust suits—would begin to transform his image into one of a selfless philanthropist while safeguarding his funds in a tax shelter.
In effect, Rockefeller merely transferred funds from one pocket to another, where he retained full control of his fortune, since the tax man could no longer claim an outsized share.
The practice continues today, most egregiously with Bill Gates, who now controls foundations with assets in excess of $50 billion. His foundations not only aspire to good works such as in public health but to profit in the process. As an example, through his foundations he owns vaccine patents and invests in companies that own vaccine patents. Simultaneously, he promotes mandatory vaccinations through grants to governments, the World Health Organization, and GAVI, a global vaccine alliance that includes Big Pharma. The effect is to create a market for the vaccines his foundation profits from, increasing the assets he controls.
When taxpayers make donations to arms-length charities, their net worth decreases by the amount of the donation, less a charitable tax credit. When they make donations to their own charities, their net worth effectively increases, because they get the charitable tax credit from the government without ceding control over their donation. They then can augment their assets by investing through their charity, which pays little or no taxes on its income, letting the charity grow its assets despite the donations it subsequently makes. Moreover, such private foundations can put family members on the payroll and jet set around the world on foundation business, all the while funding their own pet projects on the taxpayer’s dime.
Although many private foundations are doubtless set up for selfless reasons, all too often the main beneficiary is the donor, and not just through virtue signalling.
The United States now has 120,000 private foundations, their $1.2 trillion in assets having more than doubled since 2005. While the rich who set these up always maximize their tax breaks—as much as 74 percent—they often minimize their giving to the 5 percent required by law. A handful of wealthy donors now accounts for most of the annual philanthropy in the United States, much of which has the effect of draining the public coffers of tax revenue.
Governments should never have agreed to the creation of private foundations but now that they exist they should at a minimum be taxed to help offset the enormous cost of the COVID-19 pandemic. This tax would be welcomed by progressives—they lament that America’s 664 billionaires are reportedly donating a mere one-tenth of 1 percent of their wealth to pandemic relief, particularly since their wealth skyrocketed during the pandemic, from less than $3 trillion in March 2020 to $4.3 trillion by February of this year.
Conservatives should be equally receptive to a tax on private foundations, which are overwhelmingly left-leaning and responsible for much of the wokeness that pervades society. A tax on foundations would curb their wealth and lessen their influence. It would also introduce a measure of social justice: If woke-capitalist foundations are spared from paying a share of the government’s coronavirus spending spree, the less affluent, non-woke majority would need to make up the difference.
For private philanthropy to be free of the taint of financial self-interest, the Mark Zuckerberg model should be followed. Zuckerberg won’t be making money by virtue of setting up a private foundation—he intends to disburse his billions through a private, tax-paying corporation. That’s a virtue signal all can endorse.
Lawrence Solomon is a columnist, author, and executive director of the Toronto-based Consumer Policy Institute.
Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.