October 5, 1999
(edited January 17, 2010)
I think we are all aware of how
well the economy has been doing in recent years. The unprecedented growth has
resulted in prosperity for many people beyond what they may have imagined was
possible. For many people the amassing of a million dollars of net worth was
a dream they didn't really expect to happen. Now many of those same people likely
dream of $10 million. Those with $10 million dream of $100 million and those
with $100 million dream of being billionaires! Much is being written about the
wealth of so many. At the same time there are much larger numbers of people who
have not been so fortunate. There are many people who go to bed hungry. Even
in "affluent" communities there are long lists of people waiting to
gain access to barely habitable Federal housing. For reasons of health, location,
skills, misfortune, or disadvantage there are large numbers of people in need.
Who is responsible? The government
or those who are more fortunate? Many would agree it is at least in part the
latter? What can be done? A lot. For those of us who have been fortunate there
is a range of ways to help out. Basically, there are so many ways to help that
there are no excuses for not doing so. The means to help follow a hierarchy as
do so many things. At the base of the pyramid of helping is giving money anonymously.
This can be done through the United Way, churches or synagogues, private foundations,
various national appeals, or directly to pinpointed charities. Web sites abound.
A few links can be found here.
A second level up the pyramid
is to not be anonymous; to directly support causes that are meaningful or important
to you or your friends and family. A couple of years ago I attended a reception
of the Society of Alexis de Toqueville, a group of contributors to the United
Way who exceed a threshold of $10,000 in giving per year. At the reception I
was astounded both at how many people were there and how many people were not
there. It was initially impressive to see a group of 150 or so in the room. Some
quick arithmetic suggested that the giving represented was probably greater than
$2 million. On the other hand seeing that there were just a very few people (literally)
from any one of the major companies represented (GE, IBM, Merrill Lynch, Chase
Manhattan, Texaco, etc.) made it painfully clear how small the participation
really was. Given that the stocks of all these companies (and many more) has
appreciated so much and the additional fact that these companies all provide
a corporate match of the employee gift shows how much potential there really
is. Suppose, for example, an employee had options to buy company stock at $25
per share and the current price of the stock was $50 per share. A gift of just
100 shares of stock would be worth $5,000. The company match would make the gift
worth $10,000 and establish the employee as an Alexis de Toqueville giver. The
cost of the donation to the employee would be $2,500 to exercise the options
plus a capital gains tax (assuming the donated shares had been held sufficiently)
of roughly $750 minus a tax savings of $2,000 (assuming a 40% tax bracket) or
a net cost of $1,250. The leverage of the gift: 8 to 1!
A further extrapolation of the
leveraged giving idea is the formation of a private foundation. On October 21,
1998 the Senate passed a bill which made permanent the section 170(e)(5) about charitable
deduction for gifts of appreciated stock to private foundations. This
means that any person can establish a private foundation and use appreciated
stock to do so. This can be a very useful way to reduce tax obligations in the
event of a bonus payment, retirement payout of restricted stock, or any "spike" in
income. At the same time the foundation can be used to provide charitable donations
for subsequent gifting or even to receive and distribute charitable donations
from others . There are a few catches but they are reasonable. One is that your
foundation must give away at least 5% of it's average net assets per year. Another
is that you have to file a tax return for the foundation. If all this is too
daunting, you can donate to an existing foundation that someone else has established.
Some links to resources can be found at http://www.jcdowning.org/ An
example of a simple private foundation and links to the tax forms can be found
at http://patrickfoundation.org
At the Alexis de Toqueville reception,
hosted by Jane Pauley (NBC) and Bob Wright (GE), I was quite impressed with the
brief comments made by Jane. She talked about the positive impact people can
have by publicly revealing the amount of their contributions. Put modesty aside,
she said, and let others know. It will challenge them and spur larger gifts.
I think she is right. As the United Way and others publish their gold/silver/platinum
giver lists the top categories seem to be growing.
And then there is the most important
gift of all -- personal involvement. Your time is your most scarce resource and
giving even a small amount of it is often very difficult. In the end however this is
the greatest gift and the greatest leverage. An hour of time to a board or committee
can be as valuable as the 8 to 1 leverage of a financial gift.
How can we get more people thinking
about all this? One idea is e-philanthropy. It is not just "click here to
donate". It is a larger idea. Creating a local community of interest,
a charity portal, that can enable charities to make their needs known and where
those with resources can make their abilities known whether it is an anonymous
gift, targeted visible funding, or volunteer time. If the idea were to spread
it might mean enabling people to contribute to charities where they grew up,
went to school, or have a vacation home. It might also be a resource to help
people set up their own private foundations or contribute to existing ones. It
might also be a way for the smallest of charities with no executive director,
corporate sponsors, nor advertising budgets to make themselves visible.
The bottom line
is simple. Incomes and
assets are up. So is the need of those less fortunate. Let's give e-philanthropy
a chance.
An interesting article about e-philanthropy
can be found at http://www.greenstar.org/e-philanthropy/