Mark Zuckerberg: Charity Is Nothing More Than A Way To Escape Paying Tax …

6 Dec 2015 | Author: | No comments yet »

Chennai flood aid shows the power of tagging and social graph.

That’s the question dogging Facebook CEO Mark Zuckerberg and his wife Priscilla Chan after their announcement this week that they will donate 99 percent of their Facebook shares — valued now at about $45 billion — to “further the mission of advancing human potential and promoting equality by means of philanthropic, public advocacy, and other activities for the public good.” Cue the outrage, always below the surface when it comes to young Silicon Valley wealth, even more so as the nation grapples with growing income inequality. The changes excite many in the charity world but also raise questions about effectiveness, ethics and the impact on older charities that may not share in any windfall. Foremost, there is applause for the new wave of philanthropists, led over the past five years by Bill Gates and Warren Buffett and subsequently joined by Zuckerberg and scores of other billionaires in the United States and abroad.

From funding the entire National Science Foundation for almost six years, to buying dozens of private islands, here are some of the things their enormous wealth could buy. The Giving Pledge, founded in 2010 by Gates and Buffet, now has 138 billionaire signatories from 15 countries who have pledged to give away more than half of their wealth. He’s ‘donating’ his FB shares to an LLC that he controls, for minimizing taxes,” Twitter user wrote. “And b/c Zuckerberg’s thing is an LLC, he can give to political organizations, SuperPACs, all that stuff, w/money that was never taxed,” tweeted ProPublica reporter Jesse Eisinger. “A charitable foundation is subject to rules and oversight. Zuckerberg and Chan’s wealth could fund a significant portion of the federally supported scientific research in the country for a year: NASA’s 2014 budget was $17.8 billion, while the National Institutes of Health’s 2015 budget was $30.4 billion.

Many, including Zuckerberg, want to be personally engaged in the oversight and management of their pledged funds, and are finding non-traditional ways of leveraging them. Amir Pasic, dean of Indiana University’s Lilly Family School of Philanthropy, drew parallels between these modern-day philanthropists and those from the earlier Gilded Age, roughly a century ago, when the Carnegie, Ford and Rockefeller families pioneered a new type of charitable foundation. “This new generation also is innovating – they have good reason for worrying that doing things the way they were done before may not succeed,” Pasic said.

The couple could also help develop more than 37 new Food and Drug Administration-approved drugs, given that the average cost of getting a new drug to market from start to finish is about $1.2 billion, . Facebook, as it did during the recent Paris attacks, activated its “safety” feature that helped those in the affected area announce to their friends that they were safe.

In Hong Kong, the fast-expanding benefactor bandwagon is reflected in a recent UBS/PwC 2015 Billionaire Report that forecast an unprecedented wave of philanthropy, with the current generation of billionaires reconciling themselves with ageing and the need to preserve their legacies. But what I found more fascinating, and powerful, was the way tagging, the business of connecting people by mere mention on Facebook, helped during the floods. Of course, a pertinent question is whether the city’s super-rich have put their money to good use rather than for “conscience laundering”, in the words of Peter Buffett, son of Warren.

Often called “generosity for nerds,” effective altruism uses data science to calculate how people can ensure that each dollar they give has the greatest impact on the lives of those in need. If no giving, or impact or social purpose investing ever came of this LLC, I think people would pay attention to that.” In the Facebook post Tuesday first announcing his plans, Zuckerberg said the Initiative will focus on “promoting equality,” an objective that Gabriel Zucman, an economics professor at the University of California, Berkeley, found commendable — and ironic. “Promoting equality starts with paying one’s taxes,” Zucman said in an email to CBS News, while noting that Facebook shifts billions of dollars of profits to zero-tax locales like the Cayman Islands. “If billionaires are free to choose how they contribute to society, why shouldn’t I?

I recalled the Gujarat earthquake of 2001, when Internet was still in its infancy in India, when Kutchi people from around the world rallied around a website called Panjokutch.com to raise relief for the affected. Twitter, of course, is perhaps better for raising public awareness, goading mainstream media, calling out for blood donations and doing a broader range of things. According to Facebook, the new initiative will be organised as a limited liability company, rather than as a non-profit foundation, potentially giving it the ability to do political lobbying.

There has been an arcane, technical conversation brewing about whether going the LLC route is more selfish than creating a foundation or making donations outright. To some experts on philanthropy, that’s an area of concern. “With sums of that size, where should we draw the line?” asked Kathleen McCarthy, director of the Centre for the Study of Philanthropy at the City University of New York. “What role should the uber-rich have in shaping public policies and public opinion?” She noted that Virgin Group founder Richard Branson and some other contemporary philanthropists are eager to invest in entrepreneurs and for-profit companies, a trend which she said could blur the boundaries between business and philanthropy. “They are not behaving like a traditional philanthropy,” said Leslie Lenkowsky, professor of public affairs and philanthropy at Indiana University. “They are instead trying to achieve philanthropic purposes using a business model.” Philanthropic foundations such as the one set up by Microsoft Corp co-founder Gates typically support non-profit organisations, and they are required to pay out at least 5 per cent of their assets in grants each year, a restriction the Zuckerbergs will not face. Instead, they consult think tanks like GiveWell to find the most efficient ways to reduce suffering — for instance, by combating the spread of parasitic infection in sub-Saharan Africa. It is relatively new for philanthropy, but it is being used by eBay founder Pierre Omidyar, Laurene Powell Jobs, widow of the late co-founder of Apple, and others. Given the breakdown in communications, the virtualisation dramatically helped efficiency because you could just ping (alert) those connected with the room linked to the lay of the land.

In effect, said professor Ray Madoff of Boston College Law School, this means that the large-scale donors are able to tackle charitable initiatives under their own name with funds that might otherwise have financed government programmes. “We say: ‘Wasn’t Person X very generous,”’ Madoff said. “But that person’s investment is actually subsidised up to 60 per cent by the rest of us, so there’s a significant public investment in this.” Another consequence, Madoff said, is a relatively smaller share of charitable gifts in the US going to traditional charities such as United Way and the American Red Cross. Instead, effective altruists suggest “earning to give”: taking a high-paying job even if it does not reflect your values, because the disposable income you can donate will help more people than you could by volunteering in the field.

Tens of millions of dollars were spent on restructuring and shifting children to charter schools, but “those changes were really not transformational, as hoped,” Dale Russakoff, author of “The Prize: Who’s in Charge of America’s Schools,” told CBS News. The CEO of Chennai-based software firm Intellect Design Arena, Arun Jain, set up a similar network of his own on Facebook, and led a corporate-style relief mission aided by employees. The biggest gainers, she said, have been donor-advised funds, which enable donors to make a charitable contribution, immediately receive a tax benefit, and then recommend grants from the fund at any time thereafter. Zuckerberg as an individual could do the same thing.” As a possible indication of a desire to be transparent, Zuckerberg and Chan have created a Facebook page for the initiative, including a timeline going back to 2009 of their biggest investments. Accordingly, it has attracted support from high-profile fans like Elon Musk and Peter Thiel, and produced at least three books this year, including “The Most Good You Can Do,” by Peter Singer, an E.A. advocate and professor of bioethics at Princeton.

The Zuckerbergs have yet to outline specific organisations or causes they will fund but said the initial areas of focus will be curing disease, innovating education and expanding internet connectivity. In a society where philanthropy takes the place of what government should be doing — investing in improving education or backing technologies to stop global warming — what the Chan Zuckerberg Initiative does matters. Their billions can make waves. “Is a status update enough for the scale of the influence they will have on all of these spheres?” asks Janet Camarena, director of transparency initiatives at the Foundation Center, which collects philanthropy data. “There is no regulated transparency there.”

Another Facebook friend hollered for help to aid someone whose neighbour had died and wanted ice to preserve the body even as waters swirled around the area. But it ended up moving thousands of students to new schools while laying off teachers and support staff, and critics said the effort failed to involve the community.

The couple’s recent donations include US$20 million to EducationSuperHighway, which helps connect classrooms to the internet, and a new acute care and trauma centre at San Francisco General Hospital, where 30-year old Chan works as a paediatrician. We know the Internet connects us all in so many ways, but social networks such as Twitter and Facebook are adding layers of intelligence that may make some of us feel that Zuckerberg deserves the money he has made. They have also said they are passionate about personalised learning, or using technology to help kids aged from five to 18 to learn at different speeds.

For instance, Professor Singer criticizes organizations like Make-a-Wish, which spends an average of $9,425 on feel-good missions to fulfill children’s dreams, when the same amount could make a bigger difference elsewhere. Optimized philanthropy requires letting go of empathy for any one victim, and abstracting people’s suffering into calculable units that can be affected en masse and at a distance. To many, this sounds admirable but unnatural — a tension the writer Larissa MacFarquhar captured when she described E.A. as the charitable equivalent of a drone strike program. Effective altruism’s dismissal of sentiment echoes the philosopher Immanuel Kant, who centuries ago argued that passion was incompatible with moral action. Crucially, they fail to account for psychological evidence that emotion — and especially empathy — adds a powerful, positive spark to philanthropy.

Consider a study by the social psychologist Lara Aknin and colleagues: Participants recalled a previous purchase made for themselves or someone else, and reported on how good that had made them feel. The researchers then gave participants a cash windfall, and the subjects were invited to choose whether to donate it or spend the money on themselves. The participants who felt a “warm glow” from past altruism were more likely to donate their new winnings, suggesting that the emotional punch of personally meaningful giving — suboptimal from an E.A. perspective — can turn a one-time giver into a habitual philanthropist.

This effect was apparent when my colleagues Sylvia Morelli, Ihno Lee, Molly Arnn and I surveyed Stanford students about their generous behaviors and the emotions they felt. Konrath and her colleagues recently found that volunteering reduced older adults’ mortality risks four years later — though only if their kindness was driven by genuine concern for others. Psychologists, myself included, have argued that people choose when and with whom to empathize; for instance, we take the time to consider one person’s suffering while turning away from another’s. It’s true that we often choose “easy” empathy, guiding our emotional energy toward people who look like us or whose suffering is well-publicized.

Daniel Batson and his colleagues showed that people who deliberately take the perspective of distant others develop more compassionate attitudes toward them.

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