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Adam Ruins Everything on Billionaire Philanthropy
Meh. His arguments boil down to "isn't the government better at spending money?" and "Rich people are bad, they shouldn't be rich!". None of his points really have anything to do with these foundations.
The government isn't "better" at spending money. They have a LOT more of it to spend, though. If the US Government got some tax revenue from, say, inheritance tax when Warren Buffet dies, I don't see how Congress is going to say "oh nice, a couple more billion dollars to go in our trillions of dollars budget, lets spend it on education". They're going to spend it on military or whatever. People lobby congress to spend money and make laws that benefit their company/industry. So that cancels out more than half of his 5 minute video for me.
The beginning of his video talks about how the media portrays it, which is a different subject.
Rich people being rich is an entirely different subject. They are rich, and you can't go back in time and change that. So that cancels out another minute or two of his video.
He tries to make a point about how they only have to spend 5% of their money every year, like that's somehow bad? Compare it to a person in retirement: If someone starts with some money in their retirement account with 4% interest (and 3% inflation), if they withdraw 5% of their balance every year, they'll run out of money. The Gates foundation has a plan to spend a lot more than that after they die. They're not required to, sure, but why should they be?
All in all, I still fail to see how this strategy is bad for society overall. Argue all you want that there shouldn't be any individuals with this amount of money, but that's a different subject.
The government is elected, oligarchs are not. Governments certainly can waste a lot of money, but they can be frugal too. For instance, expense ratios for Medicare are just a small fraction of private health insurance. Meanwhile, Bill Gates spent a fortune bending the American educational standards to confirm with his political philosophy and, by his own auditor's conclusions it raised costs for everyone while degrading educational outcomes.
Without embracing the idea that billionaires are somehow just better at everything than most citizens, there is no reason to think they should have seriously outsized influence on public policy. Anyone paying attention today would be insane to conclude that our system is any kind of meritocracy.
If billionaires want to spend their money on charitable causes, I think that is great. The problem comes in when they use foundations to hide their money from taxes, starve the government of revenue, then backfill the deficiencies with systems designed to drive even more money to the top. Charitable contributions beyond what most people can make should not be tax deductable. Billionaires should pay what they owe, then can choose to be charitable with the rest.
If you think these massive foundations are earning 4% interest, you are out of your mind. The S&P500 index averages well over 10%. Private equity does even better than that.
Ok, then change it to 10% and do the same math. If it goes up 10%, loses 3% to inflation, and they're required to spend 5%, that leaves a 2% return. Next year they'll have 2% more money, so 5% of that is even more... etc.
I was just saying Adam in the video makes it sound like 5% is bad?, without saying why it should be higher.
RMDs for some personal retirement accounts are in the same ballpark of 5%. Should people in retirement be required to withdraw more?
The Nasdaq has been above 16% but, again, that's nothing compared to what private equity can earn - especially when paired with political connections. Earning 2% after inflation and expenditures means the principal must never be touched, but that's not the real problem. The problem is that the tax deductions happen immediately while spending the money back into the economy is postponed indefinitely.
For some accounts yes, but as people age that percentage goes up based on life expectancy and can go much higher than 5%.
Charity is great and should be encouraged, but effectively taking money out of the treasury to fund private charity gives the ultra wealthy an extreme level of undue influence over the rest of us. You and I don't get to decide exactly how our personal taxes are used, and neither should a billionaire. How that money is spent is a collective decision through our government representatives, and nobody should have massively outsized influence. I would go further and say that any wealth over $10m should start running into an exponentially curved wealth tax that makes accumulation beyond $100m near impossible. (Obviously those marks are arbitrary, but I think that's a good range for today's dollar.) Wealth hordes of over $100m are really only useful for controlling society in order to collect even more money, whether it's spent on buying politicians, controlling markets, or disseminating propaganda.