Serious giving in the USA

Billionaires Bill and Melinda Gates have earned worldwide praise for their decision to use a large portion of their wealth to fund the world’s largest private charitable foundation.

Along with business investor Warren Buffett, their organisation uses Gates’ and Buffett’s massive fortunes to fund health, development and education programmes at home and abroad.

But they are not content with just their own giving. In May they launched an initiative that could change the face of philanthropy forever.

The idea of using your fortune to benefit the general public is not new.

In the 1600’s, one of America’s most respected universities, Harvard, was founded after a wealthy man bequeathed to them his library and half his estate.

Interestingly a few years later, Harvard held the country’s first recorded funding drive, raising the sum of $500.

The idea of raising money by asking people to donate was so novel that there wasn’t even a word for it, and the organisers dubbed it “begging.”

But Americans took to charitable giving like ducks to water and the importance of personal generosity became a central part of the American character.

The concept was further encouraged by millionaire businessman Andrew Carnegie in his essay the ‘The Gospel of Wealth’.

He stated that a wealthy person, rather than handing his wealth over to his children on death, should instead “administer it as a public trust during life.”

Carnegie practised what he preached and by the time he died in 1919 he had given away over $350 million dollars (over $100 billion in today’s money).

His charity set the benchmark for those who followed including John D. Rockefeller and of course the Gates and Warren Buffett.

Now America has 18 of the world’s 27 wealthiest charitable foundations.

That’s not to say that the US population as a whole is the world’s most charitable. With per capita giving estimated at only $14 per person, the US lags greatly behind top rated Luxembourg at $114, Norway at $96 and Sweden and Ireland at $66.

However the US still can’t be beaten in the large scale philanthropy stakes.

Studies have shown that by far the main reason people give is due to a personal connection, belief or experience.

But the motives can vary depending on how wealthy the giver is. And it’s not just the desire to do good that encourages the wealthy to give back.

There is the social status that results from having a school or an opera house named after you.

And the US offers generous tax breaks for charitable giving.

Charitable donations to churches or registered non-profit organisations can be deducted from a donor’s total income meaning they can use it to minimise their income tax (President Obama and the state of New York, where many wealthy people reside, are looking at wiping this).

Gifting can also mean minimising taxes on estates or capital gains, among a number of other ways.

British writer Andy Smith said there are also cultural factors behind Americans’ generosity.

Self-made millionaires are regarded as heroes and the idea of passing your fortune on intact to the next generation is not as valued as it is in places like the UK where inherited wealth is the hallmark of the gentleman and the family wealth is to be protected at all costs.

So what then are Bill and Melinda Gates and Warren Buffett doing to change the philanthropy formula?

In what must be the biggest fundraising drive in history, they’re asking American billionaires to pledge 50% of their wealth to charity, either in their lifetimes or at their death.

Should their plan take off it could result in a $600 billion boost to the coffers of the philanthropic world.

Bill Gates is hoping that once the wealthy start signing on, they might even pledge more than 50%, as some have already done.

40 people or couples have signed up to the pledge so far, including Michael Bloomberg, Barron Hilton, Larry Ellison, David Rockefeller and Ted Turner.

And both Gates and Buffett are encouraging people to put a definite end to when the money must be spent – the concept adopted by Chuck Feeny of “giving while living.”

Gates believes we should “attack today’s problems with today’s money” and leave the next generation’s problems to be solved with their wealth.

Buffett criticises many foundations for only spending the legal minimum set by Congress of 5% of assets each year to qualify for tax status, rather that acting urgently to address the world’s social challenges.

By changing the culture to giving now rather than after death, as has been the tradition, they believe people will get a lot more out of it and ensure it gets spent in a desirable way.

The Gates and Buffett initiative is a bold and admirable plan, and one that even if it only fractionally succeeds, will have immense value to the US and the whole world.

By Jo Blick

Photo – Bill and Melinda Gates and Warren Buffett