Giving gifts or paying taxes

You probably know that Eli Broad has given away lots of money - more than $650 million over the last five years - to all kinds of educational and cultural institutions, from Harvard to LACMA. But did you also know that for every three bucks he gives away, the federal government typically gives up a dollar or more in tax revenue because Broad can take a charitable tax deduction (and because there will be less in estate taxes)? “I believe the public benefit is significantly greater than the tax benefit an individual receives,” the L.A. billionaire told the NYT. “I think there’s a multiplier effect. What smart, entrepreneurial philanthropists and their foundations do is get greater value for how they invest their money than if the government were doing it.” OK, but not everyone agrees. The Times continues its Age of Riches series with a look at what degree the wealthy are helping society. Topping the list of doubters is Newport Beach bond guru Bill Gross, who noted in a recent commentary that "when millions of people are dying of AIDS and malaria in Africa, it is hard to justify the umpteenth society gala held for the benefit of a performing arts center or an art museum.”

Philanthropists like Mr. Broad say that looking at philanthropy solely as a means of ameliorating need is too narrow. “If you look historically at what Carnegie did with creating a library system and the Rockefellers in creating Rockefeller University, I think it does a lot more for society than simply supporting those in need,” Mr. Broad said. About 2 percent of the money Mr. Broad has given away through his two foundations over the last five years, or $15 million, went to support organizations like the United Way and the United Jewish Fund, which serve needy people as well as the middle class. The foundations also have given money to groups that help homeless children, and the International Rescue Committee.

Still, Mr. Broad dedicates his biggest gifts to areas he thinks lack government support, like the $25 million he gave to the University of Southern California last year to found an institute for integrative biology and stem cell research, or the tens of millions he dedicated to complete the new Disney concert hall in Los Angeles. Like many major philanthropists, Mr. Broad said he considered such gifts an illustration of the Chinese proverb: “Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a lifetime.” The argument is that simply taking care of the poor does nothing to eliminate poverty and that they will ultimately benefit more from efforts to, say, find cures for the diseases that afflict them or improve public education.

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As for Mr. Gross, despite his uncharacteristically fiery criticism of what he calls “philanthropic ego gratification,” some of the large gifts he and his wife, Sue, have made are not so different from those made by other billionaires. He has given millions to a local hospital, for example, and for stem cell research. And in 2005 the couple gave roughly $25 million to Duke, Mr. Gross’s alma mater. But the Duke gift illustrates Mr. Gross’s priorities. The money is almost exclusively for scholarships. “Universities have their own thing going — they want to build infrastructure and endowments and perpetuate their system, which isn’t necessarily in the social interest,” Mr. Gross said. “Scholarships get a little more down to the ground level.”