My family endowed a (small) prize in memory of our academic parents. Universities overwhelmingly prefer untied donations, but some significant "God, not on sports, please" incidents have led to suspicion of how they think donors feel about the spending.
(The prize is to the most deserving student irrespective of academic status, across arts/architecture and computer science and from feedback has been a godsend to some cash strapped mature students at times. I'm happy)
My grandparents gave an award for pulp and paper science that is still given out. It’s tiny now, but a full ride for the student. At one point they - the school - were very appreciative, but their enthusiasm has dwindled quite a bit.
There's a point in the life of any endowment below the gigantic where it's rate of "return" (judged in the wide, not just financially) feels to drop below the hassle of maintaining it. I think some economies have laws against "in perpetuity" finances.
Anthony Trollope based "the warden" around the consequences of a bequest in medaevil times carried into Victorian English Anglican church politics.
If the student(s) still value it, I think it's doing its job. Good on your grandparents!
> some economies have laws against "in perpetuity" finances.
Indeed, but it's a bit different. A will or trust is limited to some period - say 21 years after the latest beneficiary.
But there's a difference between a trust with very specific rules, and a general endowment.
Doesn't seem to work out the same way. Also, there's a lot of variance in state law.
(Side note, did you know that SPY is a trust that will dissolve after certain people die? In the early days of ETFs they didn't... bother figuring out the right legal structure, so they just used a unit investment trust, tied to a dozen or so specific people. So maybe have an exit plan for SPY by like.. 2090-ish, I forget)
> as when someone donates large sums to endow professorships in niche topics
Linking to
> When Strings Are Attached, Quirky Gifts Can Limit Universities
Going on to say that Princeton is being forced to run lots of greek courses due to dead guy paying for it.
Well...duh...of course. Wasn't that the point of the donation? The donor obviously wanted to imagine Greek studies going on forever.
I presume after some period they could stop? Give the money away, or repurpose it.
For me this is an arguement against the whole concept of wealthy benefactors vs taxation. If you tax the money the government can spend it on the public good. If you let the rich guy keep it they will spend it on their own whims.
No, but the default opinion seems to be that rich will spend it well and the government will waste it. This is plainly absurd. At least the people have a degree of democratic control over the government.
I went to a graduation a few years ago at Carnegie Mellon. Some hedge fund guy was making his biggest donation yet and gave the commencement speech. It was endlessly about him and the new building to be named after him and how he was about to own an NFL football team. There was a Nobel Prize winner seated next to him on stage. I don't think she got to say anything, but was recognized for her work in cancer research. The juxtaposition felt Kafkaesque and a bit sleazy.
to be fair, if she had finished the job and cured cancer, she could buy a Premier League team* (*cuz academics == soccer)
There is a natural tendency to diminish money as a measure of anything good, but money really is the yardstick by which we jointly measure all things, trading off time with kids, family, travel, leisure against other priorities, and being rewarded by the rest of society for our contributions to what they want to spend money on, their tradeoffs.
Turns out that there are a bunch of very skilled highly educated people who want to spend their time researching cancer (which cure they could sell for a lot of money), compared to those who are most capable of and interested in, financially restructuring companies.
That hedge fund guy's donation to CMU is tax-deductible; we do that because everybody loves a philanthropist giving. His tax bracket is let's say 50%, so, where he would have owed $50 million to the government on that $100 million income, by giving it to CMU, they get the full $100 million and the guy owes no tax; of course leaving it to the rest of the tax payers to cover that $50 million in the state and federal budgets... but that's a good deal because a private elite university got more money? (And if hedgie donated appreciated securities rather than income, the bracketed tax savings get amplified that much more...)
There are plenty of places where "the market" chooses the wrong winners (by some important measures) but most of the complaints about the market don't go in that direction. Talk about how important money is, instead of socially devaluing it, then it would be easier to focus people's attention on cartel and monopoly pricing, negative externalities, etc.
Giving a 50 million dollar donation does not mean you owe zero tax on 100 million of income. It means you owe exactly the same amount of tax on every dime you kept. Deducting charitable donations just means reducing your income by that amount. You still pay tax on all the rest.
Secondly, there are annual limits on the amount you can deduct, percentage wise. What the limit is exactly is circumstantially contingent, but you are not allowed (generally) to zero out your income even if you donate 100% of it.
That being said, I agree that donating to universities is one of the dumber forms of philanthropy.
giving a 100 million dollar donation allows you to subtract 100 million from your income (assuming you had a lot more income, there is a limit) which at a 50% tax rate means you gave $50 million out of your account and the charity received $100 million into theirs, the rest coming from the govt in the form of taxes you would have given them but they didn't get from you.
non-profits accepting donations will allow you to structure them as is tax advantageous to you, say $10 million a year for 10 years, is announced as a $100 million donation.
but with appreciated assets something trickier happens. Say I paid $10 million for a block of stock, and it appreciates to $110 million. If I sell it, $100 million of that is income, but I donate the income so I don't have to pay tax on it... However, if I don't sell the stock, and just donate $100 million of it as stock, my charitable contribution is $100 million, and there is no tax on the $91 million portion which is income (did I do that arithmetic right?) and therefore I can deduct the $100 million donation from an additional $100 million of income completely unrelated to this block of stock. The US treasury and public will never see any tax for all that income, and will give me a break on the rest of my taxes.
Seems a pretty obvious solution to this loophole is to reduce non-cash deductibles by what would have been paid in capital gains, and have the non profit pay capital gains when they sell?
I don't know if there's an easy answer, the question is how valuable to society is it for large donations to be made to all the things that qualify as non-profits? The public likes the idea of philanthropy, and the type of elites who have access to political networks like these types of institutions.
My goal/interest here is simply to be transparent about how it works; how it works could be a good thing, I don't know. The wealthy donors are giving lots of money; the question is, is it ok for wealthy elites to give a chunk of money, let's call it 50%, and influence where the money goes in a way that's similar to and impacts govt budgets that are set politically? There are plenty of rich people on both the left and the right; but elitism is a separate issue.
I have really enjoyed your comments on this thread fsckboy.
> The public likes the idea of philanthropy
I think that may be because very rich donors can afford good PR. Also there are few politicians strong enough to say, "sure x spent 100m on postgrad study of his niche interest, but if the treasury had got it instead it could have spent it on teaching everyone's kids to read and write".
I think a (real) cap on tax deductability would have a interesting consequence.
a) the government has more money and better public services. It no longer has to cosy up to a 'philanthropist', helping them look good
b) real philanthropists would still donate. However people pursuing dubious interest, like funding niche courses for elite kids at an elite school, would wane. Public stops looking at philanthropy in same way, perhaps
> sure x spent 100m on postgrad study of his niche interest, but if the treasury had got it instead it could have spent it on teaching everyone's kids to read and write.
You and I both know that all that money would have gone to defense contactors and hospital administrators if the government had taxed it.
On average, nonprofits provide substantially more public good per dollar than the government does.
This also doesn't have to be true. The same class who are hoarding the wealth are the same class lobbying the government about how to spend tax dollars.
> Secondly, there are annual limits on the amount you can deduct
There are annual “limits”. No sensible mathematician, programmer, economist, or other non-politician would look at the actual formula and think it was a limit.
> money really is the yardstick by which we jointly measure all things
It’s just not a good measure though. When I contribute to opensource, is my contribution worthless because nobody pays for it? If a company lowers the price for insulin, is that an indication that they are providing less value in the world?
I hear what you’re saying. Money moves the world. But there are an awful lot of things that humans value that don’t show up on a balance sheet. We become blind to all of that when we focus too much on monetary rewards.
Leaving aside the exact numbers, there are also ways in that appreciated assets can be donated, the gains are basically tax shielded, and an annuity based on an actuarial determined portion of the assets can be paid out.
The details are more complicated than that of course.
Yeah, in Canada there are relatively huge tax benefits from donating appreciated assets: both foregoing the capital gains on the appreciation and getting a tax credit for the market value.
And on a big donation that the charity inevitably sells, the other shareholders pay the price when they get dumped on the market (but you still get the pre-sale valuation).
Aaaaand if you arrange to get family naming rights to the whole org, a building or faculty, the taxman still considers it a "no personal benefit" 100% eligible donation.
Normies donating employment income could only dream of that degree of escaped taxes. The tax benefits won't even cover the income taxes you paid at 6 figure incomes. Go to a dinner fundraiser and they're sure to exclude the dinner value from your charitable receipt.
What? It’s very easy to be in the 50% range all in. Live in Manhattan and make a million in W2 wages, boom there you go.
Despite all the heeing and hawing, rich people do pay a ton of taxes. It’s mainly the one percent of the one percent you hear about that can structure both their income and lifestyle in a way where they pay less than say someone making 50k in taxes as a percentage.
Sorry, dude, but am an UHNW individual, my income comes from investments, and year in year out I pay about 50% in tax (don't forget state and city income tax, and alternative minimum wipes out long term capital gain favoritism)
I pursue an investment strategy that would make those tricks highly risky, and or inconvenient. The tradeoff is that I believe I make more money the way I'm doing it, including the taxes I pay.
It is worth remembering that this doesn't have to be the case. The governments of the world could stop much of this tax avoidance if they had the will.
Surely the most wealthy are not paying 50% income tax on their annual increase in net wealth (see what I did there)? When there are so many ways to avoid it.
income is realized capital gains, not unrealized, and "increase in net wealth" doesn't mean anything. see what I did there? used the words for what they mean.
Exactly my point! Rich people can control how much income their investments pay, and ideally they aim for growth not
income which can compound forever without paying any tax. Because they are rich they have no need to sell most of the investments and so can defer paying tax forever. On the other hand poor people have no tax-free compounding subsidy and have to pay tax on every hour of labour they do.
It’s exhausting arguing about this on HN or any other forum. You are in a tiny yet crucial minority, at least from the perspective of taxpayers as the 1% pay the majority of all taxes.
The best part about America, and playing by the rules of America and avoiding sketchy offshore nonsense, is that you can trust the law will treat you fairly. That is the simple secret of success for America’s entire existence, along with a decentralized government that makes power diffuse and a paranoid streak that infuses the populace with distrust of authority.
Live quietly, don’t be a public figure, and you can enjoy your (b/m)illions without serious socialist threat.
I am sorry for jumping in the middle of the discussion (which you seemed to want to quit :-P) but this statement seems to weird to not check out.
After looking into it a bit it SEEMS like it's only true under a very certain reading:
- "The 1%" must refer to the 1% with the highest income, and not the 1% richest, since the actual super rich don't really (often) have registerd income at all. So it's not top 1% richest, but the top 1% of the wage receivers. How much does the richest actually tax? No clue.
- Even when it refers to the top % of wage slaves, it is still wrong for "taxes", but true for "federal income tax" only. According to [1] the top 1% made ca 21% of the money, and payed 24% of the total tax burden. So not the majority.
You seem to use wage receiver and wage slave interchangeably. The top 1% of wage receivers include people in literally millions of dollars per year who cannot reasonably be described as wage slaves.
> we do that because everybody loves a philanthropist giving.
Count me out. I have a really unpopular opinion that philanthropy is nothing more nothing less than entertainment for the giver. There is no difference between me buing a movie ticket or giving money to a charity. (Well, other than in the movie case I create jobs, in the charity I foster helplessness)
If society thinks there are some things where money should be allocated without getting anything tangible back, it should be funded via taxes, not charity. No need to subsidize private charities.
(If your government can't be trusted to manage the money, it would be more efficient to use your money to try to fix the government instead of getting yourswlf some feelgood by giving money out to whatever else)
Effective altruism? Go and pay your taxes, that is according to economic theory the most efficient way to be altruistic in all the cases someone may bee freeloading on your charity (see tragedy of commons/prisoners' dilemma)
Seems like a pretty good deal for the school. They need to run to kinko's to print out a fake degree (that says right on it that it's fake), and spend 20 minutes listening to a blowhard pontificate. I'd do that for a few million dollars at least once.
I would rather send fake PhDs to little guys who did great stuff in their garage. (Or maybe business fake PhDs to rich people if they increased their net worth?)
Lots of universities sell benches and bricks for a few hundred to a thousand dollars. The reality is that it is all used to siphon money to add more administrators. The money of endowments gets to the real mission of the university and student and state funding can go to the ever growing caste.
Faculty chairs do come with physical chairs. The ones I’ve seen are nice, wooden chairs with a little metal plaque with the title and the holder of the chair. I suspect new chairs are purchased for each new holder of the title, and you get to permanently keep yours.
Perhaps they could have persuaded if you'd pointed out that support for the fundaments of researchers is just as sorely needed as support for research of fundamentals, dohohoho.
During the early days of Covid, Microsoft bought me an Aeron chair with all the bells and whistles. It didn't even take any convincing. They just said "here's $$$$ kid, go buy yourself some office equipment"
This doesn't explain what "endowing a chair" means. How does this plump a donor's rep and ego?
Meanwhile, the entire college ecosystem is disgusting. I went to a top private university and will never give them a penny, for the way they treated both students and non-professor faculty.
The Reverend Henry Lucas (c. 1610 – July 1663) was an English clergyman and politician who sat in the House of Commons from 1640 to 1648.
A full 360 years later we're still rather in awe of the chair he endowed.
Since its establishment, the professorship has been held by, among others, Isaac Newton, Charles Babbage, George Stokes, Joseph Larmor, Paul Dirac, and Stephen Hawking.
(The prize is to the most deserving student irrespective of academic status, across arts/architecture and computer science and from feedback has been a godsend to some cash strapped mature students at times. I'm happy)