Musk charity tax reform poster child
You and I helped pay for Elon Musk’s kids’ private school.
That’s just one of the distressing takeaways from a lengthy March report on the tech multibillionaire’s kooky philanthropic foundation, which in recent years has disbursed money haphazardly to causes as disparate as fixing the water crisis in Flint, Mich., to planting one million trees with Youtube personality Mr. Beast to revitalizing the downtown of Brownsville, Texas.
And then there’s Ad Astra, the nonprofit school that Musk founded, maybe just for his offspring.
In its first year, the private academy was one of the foundation’s grant recipients.
At that time, five of the school’s 14 students were Musk’s children.
(Many of the others were the kids of SpaceX execs.)
This would be acceptable if it weren’t for the fact that Musk is essentially using American tax dollars to help fund it.
That’s because philanthropic foundations can and often do serve as giant tax shelters for the ultra-wealthy.
As the New York Times recently reported, the Musk Foundation received its largest single gift in 2021 when Musk donated a batch of Tesla stock worth $5.7 billion.
Experts estimate this gift reduced his tax bill by upward of $2 billion.
In other words, instead of using that money to build roads and bridges and schools and hospitals, the IRS just handed the second-wealthiest person in the world a 10-figure tax credit.
As Stanford political scientist Rob Reich argues in his book “Just Giving,” such transactions are common in big philanthropy.
And the upshot is that tens (and perhaps hundreds) of billions of dollars that would otherwise have gone to the U.S. Treasury to fund programs voters support are instead funneled, at least indirectly, into foundations that serve the whims, err, charitable preferences, of the uber-wealthy.
We might grudgingly stomach such a system if most of the causes in question enjoyed broad support, like enhancing kindergarten through 12thgrade education, scientific research or protecting our lakes and waterways.
But too often the missions of billionaire charities are quite problematic.
Here are just a few examples.
According to a review of its most recent tax filings, Oracle founder Larry Ellison’s foundation has already donated tens of millions of dollars (and has pledged hundreds of millions more) to the Tony Blair Institute.
The former British prime minister’s organization has undoubtedly done much good, but the American taxpayer shouldn’t be forced to help an aging English pol maintain his global influence.
A similar review of the grants made by the nefarious Charles Koch Foundation reveals many gifts most Americans would actually applaud, including many to the general operating fund of a wide swath of colleges and universities.
But other grantees raise eyebrows, perhaps most notably the Atlas Group, a mysterious network of libertarian think tanks.
One of Atlas’ most notable projects is an effort to criminalize climate protests.
And if you look at the tax filings of other well-known outfits, you’ll see recipients that, while not so provocative, are decidedly partisan.
Accordingly, the Walton Family Foundation disburses millions of dollars a year to organizations advocating for school choice.
And the Bloomberg Family Foundation likely sends more annually to groups that “accelerate transition to clean energy.”
And they do so with our financial help. Because again, the problem is not that American billionaires use their money to fund causes that lots of citizens would object to.
The problem is that the tax code incentivizes such funding by rewarding the wealthy with substantial deductions for directing donations to whatever they see fit to fund.
And such incentives are often only available to the rich. As Reich notes, our donations are only tax-deductible if we itemize our returns, and since the Trump administration tax cuts took hold, nearly 90% of Americans — primarily those with less money — don’t.
Further, our progressive tax code makes these deductions more valuable for wealthy people who pay a higher marginal rate.
For example, a person who makes $40,000 a year will likely receive no tax benefit for giving a $1,000 charitable donation while someone who makes $1 million will essentially have $370 covered by the federal government. So what’s to be done? Patriotic Millionaires’ Board Member Alan Davis outlines a sensible plan that includes closing some of the loopholes in the tax code that the ultra-rich most frequently exploit — notably the one that Musk used to secure his giant write-off.
Davis also argues for bigger charitable deductions for the rest of us.
And Reich thinks we should make such deductions available to all, whether or not they itemize.
But maybe we should think bigger and consider ending such deductions altogether because I’m pretty sure that Musk can handle sending his kids to school on his own.