Opinion: We should be skeptical of billionaires who pledge to share their wealth | CNN

Editor’s note: Chuck Collins directs the Inequality Program and co-edits Inequality.org at the Institute for Policy Studies. He is the author of the book “The Wealth Hoarders: How Billionaires Pay Millions to Hide Trillions” and co-author of the IPS report Gilded Giving: How Wealth Inequality Distorts Philanthropy and Imperils Democracy. The opinions expressed in this commentary belong to the author. See more opinions on CNN.

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In the United States, we are now treated to regular announcements of benevolent billionaires pledging to share their wealth. Amazon founder Jeff Bezos, for example, recently told CNN that he would give away the majority of his $124 billion fortune in his lifetime. Later in 2015, Meta founder and CEO Mark Zuckerberg announced that he would donate what he earns from 99% of his Facebook stock.

At this point, we should adopt a skeptical posture. The truth is, promises like these can take years, decades, or even generations to reach their nonprofit destinations — if ever. That’s why we need greater public scrutiny of billionaire philanthropy – and much clearer rules to ensure that donations actually support real charities.

Consider the Giving Pledge, an initiative founded by Warren Buffett, Melinda French Gates, and Bill Gates to increase charitable giving by extremely wealthy people. To date, more than 230 billionaires from 28 countries have pledged to donate the majority of their wealth.

Presumably, this means we would see billionaire fortunes decline. But on the 10th anniversary of the pledge in 2020, my colleagues at the Institute for Policy Studies and I found that the total net worth of the original 62 living donors had not diminished at all. In fact, he had almost doubleafter adjusting for inflation.

Part of the challenge is that the wealth of billionaires is simply growing so rapidly – ​​US billionaires have seen their total wealth increase by $1.5 trillion since the start of the pandemic, according to an IPS analysis based on billionaires data from Forbes. As our economy becomes increasingly pro-rich, even committed philanthropists are making money faster than they can give it away.

The increasingly top-heavy nature of today’s giving landscape – and the growing dominance of loosely regulated funds often controlled by the donors themselves – is an even bigger problem.

While billionaires of course continue to donate to charity, big philanthropic pledges are often fulfilled by pouring money into family foundations or donor-advised funds (DAFs) that might exist in perpetuity. Some 30% of charitable donations now pass through intermediaries such as these, surpassing direct donations to many traditional charities.

Billionaires can claim huge tax deductions – not to mention starry-eyed headlines – for parking funds in these intermediaries. But there’s little to no guarantee that the money will ever make it to charity. Foundations are only required to donate 5% of their assets each year, and most donate only slightly more than this minimum. DAFs are not subject to any annual payment requirement at all. Lax reporting requirements make it difficult to gauge their activity, but recent reports suggest that median DAF payouts are shockingly low.

Plus, billionaire charity is our tax money at work. For every dollar a billionaire donates to charity, we the taxpayers recoup up to 74 cents of that dollar in lost federal tax revenue as donors claim deductions on their income, estate, and capital gains, among others. It makes it even more outrageous that so much of that money never makes it to any real charity on the ground.

Since our taxes subsidize this system, charities need to be more transparent, with clear information about when donations reach their recipients. Payment requirements should be increased, with more scrutiny to ensure that philanthropic money reaches real charities. Elements of those reforms are included in the Accelerate Charitable Effectiveness (ACE) Act, which has bipartisan support in the Senate, although a vote has yet to be called since its introduction in 2021.

There are refreshing exceptions to the troubling trend of billionaires hoarding charitable contributions in private foundations and CFOs. For example, MacKenzie Scott recently announced nearly $2 billion in direct donations to beneficiary charities, bringing her direct donations to more than $14 billion since 2019. It’s a short story.

Ultimately, philanthropy will never be an adequate substitute for an efficient tax system where billionaires pay their fair share and democratically elected governments make decisions about investment priorities, not billionaires.