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Uncharitable giving Judd Legum
In the United States, the federal tax deduction for charitable giving was created in 1917. The idea was that non-profit organizations provide tangible benefits to society, and donations should be encouraged. The tax deduction effectively lowers the cost of donations to worthy causes through a public subsidy.
Theoretically, these tax benefits are available to anyone. But, as a practical matter, the overwhelming majority of Americans no longer receive a tax benefit from charitable giving.
The federal deduction for charitable giving is only available to people who itemize their tax deductions. In 2017, Congress doubled the standard deduction — a flat amount that anyone can deduct from their income for tax purposes instead of itemizing. The standard deduction is now $27,700 for a married couple. This far exceeds the amount of charitable giving and other common itemized deductions (like mortgage interest) for most families. So, about 90% of Americans take the standard deduction, meaning their charitable giving does not reduce their taxes.
So, tax deductions for charitable giving have become the province of the wealthy. And the way that many millionaires and billionaires use the charitable deduction has become increasingly attenuated from its original purpose. While the tax benefits of charitable giving are immediate and immense, a large percentage of this money does not flow to working charities.
A report released this month by the Institute for Policy Studies (IPS) found that over 40% of all money donated to charity in 2022 went to intermediaries — donor-advised funds or private foundations.
Giving money to a donor-advised fund allows individuals to immediately deduct the full amount of the donation from their taxes. But these funds, which are generally set up by banks or other financial institutions, do not have to distribute the money on any particular timetable. (Although a contributor to a donor-advised fund technically gives up control of their money, as a practical matter, a donor-advised fund will route the money anywhere the donor wants.) It is a scheme that allows wealthy people to immediately access tax benefits while delaying the actual charitable giving indefinitely. A 2021 study found that the average donor-advised fund in Michigan distributed just 3.1% over the course of a year. 35% of donor-advised funds in the study distributed nothing at all to charity.
Donor-advised funds are also a popular way for wealthy individuals to donate non-cash assets like art, crypto, and real estate. Since these assets are difficult to appraise accurately, they can be gifted to donor-advised funds at significantly inflated values, yielding large tax benefits. In 2023, Fidelity Charitable, one of the largest donor-advised funds, reported that it received $1.5 billion in “complex, non-publicly-traded assets.”
Private foundations are slightly less opaque and are required to distribute at least 5% of their assets each year. But, private foundations can fulfill that requirement by donating to donor-advised funds. Further, wages and other administrative costs count as a distribution, allowing some individuals to take a tax deduction for providing large salaries to family members. In 2021, “foundation trustee compensation totaled $2 billion,” including “75 foundation trustees [who] earned $1 million or more in total compensation.”
In 2022, $85.5 billion was contributed to donor-advised funds, and $44.7 billion was donated to private foundations. Collectively, that’s 41% of the $319 billion given by individuals going to intermediaries. (Among gifts of $1 million or more, an astounding 68% went to donor-advised funds or private foundations.)
According to a 2019 study, taxpayers are providing 74 cents in subsidies for every dollar donated to charitable intermediaries. This figure includes the direct tax deduction, foregone capital gains taxes on appreciated assets, and other tax benefits.
How charitable intermediaries can be abused
While some charitable intermediaries operate ethically and have a positive impact, the IPS report demonstrates these entities are ripe for abuse.
Barron Hilton, heir to the Hilton Hotel fortune, was an extremely generous philanthropist during his life, giving away over $1 billion to various causes. Upon his death, Hilton left $2.4 billion to the Conrad N. Hilton Foundation, a private foundation established by his father. In 2021, the Hilton Foundation paid $35,000 each to its trustees, including six members of the Hilton family. Further, the Hilton Foundation employed three individuals who earned over a million dollars per year, including Michael Buchman ($1,866,421), Yatin Patel ($1,205,636), and Jonathon Schroeder ($1,050,664). Three other employees, including President Peter Laugharn, were paid about $750,000. Overall, the Hilton Foundation reported more than $30 million in overhead, a significant percentage of the $320 million distributed in 2021. The total assets of the Hilton Foundation are now $8.7 billion.
In 2021, Elon Musk “sold 15.7 million shares of Tesla stock for more than $16 billion.” That created a potentially multi-billion dollar tax bill. But the same year, Musk donated $5.7 billion in Tesla shares to his private foundation, the Musk Foundation. The direct and indirect tax benefits of the donation were estimated at $4.6 billion. That equaled almost exactly 30% of his adjusted gross income — precisely the maximum allowed deduction for non-cash gifts to charity. That year, the Musk Foundation donated $160 million to charitable causes. Among the recipients were “a school attended by his children, a charity managed by his brother, and a nonprofit fighting traffic congestion on the highway he uses to commute to work.”
It doesn’t have to be this way. MacKenzie Scott received $38 billion in 2019 as part of her divorce settlement with Amazon founder Jeff Bezos. By November 2022, Scott had given away at least $14.5 billion, primarily in unrestricted gifts to working charities focused on racial equity, climate change, public health, and other issues.
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Matti Friedman: Israel’s Prisoner’s Dilemma Matti Friedman
JERUSALEM — In Israel, news of an imminent hostage deal with Hamas grips the country. Fifteen months after the attack of October 7, 2023, when Palestinian terrorists seized 250 civilians and soldiers from Israeli territory, nearly 100 hostages remain in Gaza. The oldest is 86. The youngest is 2. Most seem to be dead, murdered by their captors, or killed inadvertently by Israeli forces, but Hamas refuses to divulge how many. The hostages’ faces have become familiar to everyone in Israel. They’re on posters in bus stops, on telephone poles, hanging from highway bridges. We all feel we know them.
Even though not all details of the deal are clear, Israelis are broadly behind it—a poll on January 15 put the number at 69 percent, with 21 percent unsure and only 10 percent opposed. The mainstream Israeli position is that the government must make every reasonable effort to save the lives of captives, whether that means military operations if possible, or freeing jailed terrorists in exchange for hostages if necessary. Opponents of the deal, even if they’re tortured by the suffering of their fellow citizens in brutal conditions in tunnels under Gaza, see the deal as a form of surrender that rewards the tactic of hostage-taking and invites future attacks, saving people in the present while sacrificing people in the future. In my experience, most people actually hold parts of both positions, but when forced to choose, they tend to choose the first.
For external observers trying to understand the current debate here in Israel, the key is to realize that this is an argument that didn’t start with the current deal—or even with the current war. It’s impossible to understand the debate of 2025 without going back 40 years, to 1985. The debate is less about the details of this deal than about a basic question forced on us by the tactics of our enemies, namely: Does our willingness to assume grave risk to save individuals constitute an Israeli strength or weakness?
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WATCH: H.R. McMaster on Trump—the Good, the Bad, and the Ugly Michael Moynihan
Very few people have worked closely with Donald Trump, gotten fired, and walked away with a pretty balanced view of him.
But Lieutenant General H.R. McMaster, former national security adviser to President Trump, is an exception.
In his book At War with Ourselves: My Tour of Duty in the Trump White House, he gives an honest account of working in Trump’s first administration: the good, the bad, and the unexpected.
Last week, McMaster, 62, sat down with Michael Moynihan at the National Constitution Center in Philadelphia for a live Free Press Book Club event to discuss it all. They talk about his moments of tension with Trump, his understanding of Trump’s foreign policy, and how Trump’s rhetoric toward adversaries was actually good, despite being villainized by the press.
They also get into Trump’s current cabinet picks—ones who McMaster sees as good, like Marco Rubio and Mike Waltz, but how good picks do not ensure a harmonious administration. They discuss Trump’s options for handling Russia, Iran, and Hamas in his second term, and why McMaster is surprisingly and cautiously optimistic about Trump 2.0. —BW
Dynamics within the first Trump White House:
Michael Moynihan: It’s very clear in your book that you see your job as somebody who has to implement the president’s agenda. But it’s also clear that you see people around you who have their own agenda that they’re trying to foist upon the president.
H.R. McMaster: Absolutely. The first group are people who don’t want to give the president options. They want to manipulate decisions based on their own agenda, not the president’s agenda. Then there were the people in Donald Trump’s administration who defined the president as an emergency or a danger to the country or the world, who had to be contained. And so the problem with those groups of people is that nobody elected them.
MM: There are a couple of people in the book that say, We’re afraid that Donald Trump is dangerous, right?
HRM: Absolutely. It just made everything harder. But at least for my 30 months, we transcended it. We got things done anyway. But every element of that friction just wore us down a little bit—and the other tactics they employed undercut us.
Nobody was as surprised as Donald Trump when he won the 2016 election. So there wasn’t a whole lot of preparation in terms of who’s going to come into many of these positions. He didn’t have any kind of trust built up with a lot of the people. Now it’s going to be somewhat different. He’s had a lot more time to prepare deliberately for this, and he’s selected his people. It was easy to kneecap me, because I didn’t have a history with him. Now it’s going to be harder to do that with Michael Waltz and Marco Rubio. Although they will come under attack because there are still going to be different camps in the new administration based on different motivations.
The president is the most powerful person in the world, so people are going to try to ingratiate themselves to him and try to use him to advance their agenda. People know how to push his buttons. I’ve described my first meeting in the Oval Office as an environment of competitive sycophancy. It was unbelievable. Things were said like, “Your instincts are always so good, Mr. President” and “You’re so wise.” I was like, “My gosh, are these people serious?”
MM: Does he fall for that?
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TGIF: Hard Pivot Nellie Bowles
Welcome back. This is where, once a week, for a special reprieve, we look at the news and tell jokes. If you’re here for spiritual guidance, I can’t help you (but just in case: yes, you are forgiven your sins).
→ Biden says goodbye: President Joe Biden gave his farewell address Wednesday night, leaving with ominous warnings about dark forces (billionaires) exerting too much influence on American politics. “Today, an oligarchy is taking shape in America of extreme wealth, power, and influence that literally threatens our entire democracy, our basic rights and freedoms, and a fair shot for everyone to get ahead.”
I agree there is a new oligarchy of rich people who manipulate our political landscape, and I, for one, am glad that our president finally sees the danger of MacKenzie Scott and George Soros, billionaire political donors propping up untold numbers of causes. He’s never criticized MacKenzie Scott (formerly Bezos), but I’m sure he was thinking of her, the woman who has thrown $19 billion at activist nonprofits to sway American politics. I’m sure when he just recently gave the Presidential Medal of Freedom to George Soros, he was thinking this is the dangerous oligarch I will speak of soon.
No, I’m being silly. Obviously he means the other side’s dangerous oligarchs! When a billionaire oligarch is throwing money at your own team, they’re just a concerned citizen doing what they can with what they have. Me, I’m balanced, moderate: I love all our oligarchs, on both sides. I want more oligarchs and less democracy. I want our political battles to be fought on warring yachts off the coast of Croatia. See, California lets voters vote on everything, and I’ve seen what too much democracy looks like, and I think that Penny Pritzker and Peter Thiel could sit with each other and come up with something better for us.
Biden continued: “President Eisenhower spoke of the dangers of the military-industrial complex. . . . Six decades later, I’m equally concerned about the potential rise of a tech-industrial complex that could pose real dangers for our country as well. Americans are being buried under an avalanche of misinformation and disinformation, enabling the abuse of power. The free press is crumbling. Editors are disappearing. Social media is giving up on fact-checking. The truth is smothered by lies told for power and for profit. We must hold the social platforms accountable to protect our children, our families, and our very democracy from the abuse of power.”
First of all, Mr. President, The Free Press is doing great. But I love that Biden’s final address to the nation, his farewell, was about the need for Facebook fact-checkers. It was a presidency built around calling the refs, making us feel bad for any criticism (Hunter is a baby boy), and then if that didn’t work, just banning whatever the staff didn’t like that week.
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